5 Stocks to Sell for November

Advertisement

In case you’d forgotten, stocks can go down sometimes. October sure was a painful reminder of that, as the market was littered with stocks to sell. The S&P 500 dropped by more than 6% over the course of the month before clawing back its losses. Even now, the broader market is set to end October at about the same level it started.

stocks-to-sell-The end result is that the S&P 500 is up about 7% for the year-to-date. That’s essentially in line with strategists’ full-year forecasts for gains at the beginning of 2014, and it’s a perfectly respectable performance. But as we saw with October, the market is more than primed to punish stocks to sell when the news flow goes against equities. That’s what happens in the late stages of a bull market, when everyone is looking for stocks to sell to protect their gains.

It’s that sort of sentiment that behooves tactical investors to take a more defensive position with their portfolios. Some stocks are simply in the wrong sector for this part of the market cycle. In other cases, technical red flags say these are stocks to sell.

Whatever the reason, we’re in the home stretch for 2014’s market performance, meaning tactical investors are running out of time to correct mistakes and drive more upside. Ditching stocks with poor technicals — especially if they’re in a pro-cyclical sector — is more important now than at any other time of the year.

To help shore up your portfolio for year’s end, here are five S&P 500 stocks to sell for November based on technical weakness and fundamental liabilities.

Stocks to Sell — Oracle (ORCL)

stocks-to-sell-orclYou really need to lighten up on your tech holding in a late bull market, because tech is especially attuned to any slowdown in the economic cycle. Oracle (ORCL), with its massive dependence on enterprise spending, is a not a place you want to be if companies need to cut costs.

Heck, even if we weren’t at this stage in the market cycle Oracle would be a stock to sell based on seasonality alone. Over the last 10 years, Oracle has lost an average of 1.5% in November, according to data from Thomson Reuters Stock Reports.

In addition to poor seasonality and being in the wrong sector at the wrong time, the technicals have turned against ORCL.

The stock is now more than 10% below its 52-week high. Even more troubling is what’s happening with its moving averages. Have a look at the chart and you’ll see that ORCL just described a death cross as the 50-day moving average fell below the 200-day moving average. That’s a classic sell indicator.

Stocks to Sell — General Motors (GM)

stocks-to-sell-gmThere is no shortage of reasons to sell General Motors (GM) as we head into the end of the year. Just look at the headlines and you’ll see that the company is still hurting from the effects of its massive recall of vehicles.

But other factors are working against GM too, especially on the technical front. GM carved out a death cross back in March that has been spot on. After all, GM stock is now off more than 25% for the year-to-date with no technical support in sight. Indeed, if you’re looking for support from the 52-week low, you’ve got another 8% to fall.

Even worse, the last time GM tried to break out, it came up against resistance at its 50-day moving average. This thing is down for the count this year, with more pain to come. Being a pro-cyclical stock is no help either.

Historically, GM has been a dog at year’s end too, losing an average of 2.9% in November over the last decade.

Stocks to Sell — Coca-Cola Enterprises (CCE)

stocks-to-sell-coca-cola-enterprisesBeverage giants like Coca-Cola (KO) and Pepsico (PEP) are struggling with consumers’ changing tastes. They’re giving up fizzy drinks — even the diet ones — and that shows no sign of abating. Naturally, that’s a big problem for bottlers and distributors like Coca-Cola Enterprises (CCE).

CCE has a deceptive chart. The 50-day moving average broke below the 200-day moving average a couple weeks back — known as a death cross — and yet shares are in the midst of a rally. Unfortunately for CCE, the upside is about to peter out on this dead-cat bounce.

The company cut its revenue and earnings guidance last week — never something the Street wants to hear — citing tough operating conditions. Those “tough conditions” would be the secular shift away from carbonated beverages.

Consumers’ shifting tastes mean that the sentiment and fundamentals are against CCE, and so too are the technicals. CCE broke through support at the 200-day moving average last month. Worse, that old support line is now going to offer resistance on CCE’s current snap back streak. That means this mini-rally won’t last much longer.

Stocks to Sell — Amazon (AMZN)

stocks-to-sell-amznThe market is getting fed up with Amazon’s (AMZN) disregard for making any money. It seems almost impossible for a company with $21 billion in quarterly sales — a 20% increase over last year — to post a net loss of $437 million, and yet AMZN manged to do just that.

AMZN has long been a profit sink, and the technicals reflect it, essentially guaranteeing a depressed share price. Being a pro-cyclical retailer at this part of the market cycle is another knock against it.

Sure, Amazon could find support at its 52-week low, but it will have to drop more than 4% to test that level. That’s not an attractive proposition. More worrisome is that Amazon is boxed in by its own moving averages.

With a few brief exceptions, AMZN hasn’t been able to break above its 50-day moving average all year long. The 200-day moving average is also putting a ceiling on the stock. And as for sentiment? Forget it. AMZN is 28% below its 52-week high even as the Nasdaq 100 is within a hair’s breadth of its own high-water mark. Sell.

Stocks to Sell — McDonald’s (MCD)

stocks-to-sell-mcdMcDonald’s (MCD) sales have been falling for ages now. And try as it might, MCD hasn’t been able to arrest the slide, which is punishing the bottom line and showing up in the charts too.

For the most recent quarter, MCD said revenue dropped almost 6% to $6.99 billion to miss Street forecasts. Global same-store sales likewise missed estimates when they fell 3.3%.

A big chunk of MCD’s bedrock customers are avoiding the golden arches because of stagnant wages and job insecurity. Compounding that problem is rising competition from Chipotle Mexican Grill (CMG) and other chains offering fresher, healthier menus.

As for the technicals, MCD may find support at its 52-week low, but it will have to fall almost 4% to test that out. And any shot at upside looks to be capped too, seeing as MCD is coming up against resistance at its 50-day moving average. Furthermore, it’s nowhere near its 200-day. Based on those red flags, the death cross carved out late in the summer is still in effect.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/10/stocks-to-sell-amzn-orcl-mcd/.

©2024 InvestorPlace Media, LLC