The market is having its worst-ever start to a year, and historical seasonality suggests February will offer no relief.
If you’re hoping to outperform in a traditionally weak market, then, the first thing you’ll want to do is find stocks to sell — namely, by looking for those companies that have both unfavorable charts as well as poor seasonal patterns.
January is supposed to be one of the best months for market performance, but it was a serious bust, and even Friday’s up day to close out the month won’t be enough for January to avoid a 7%-plus loss.
And the S&P 500 loses average of 0.1% in February, according to Yardeni Research — which means there’s likely to be no shortage of stocks you’ll want to trim from your portfolio in February.
Fortunately, technical analysis and a perusal of seasonal performance can help zero in on the names that have a high probability of hurting your portfolio. So we’ve screened the S&P 500 for stocks waving technical flags and a history of negative seasonal action to find a handful of stocks to sell in the coming days.
From a cereal maker to a major airline, here are five stocks to sell for February:
Stocks to Sell: Aflac Incorporated (AFL)
Click to EnlargeAflac Incorporated (AFL) showed signs of life late last year, but the terrible start to 2016 has brought nothing but more pain.
Too bad it’s a condition that should last through the coming month — and maybe longer.
AFL stock isn’t a big fan of February as it is. Over the last decade, Aflac stock has lost an average of 2.3% in the second months of the year, according to Thomson Reuters Stock Reports. That underperforms the broader market by a hefty 2.2 percentage points.
This year could be worse given how the technicals are shaking out.
AFL just carved out its second death cross — a sell signal — in four months. Shares are so far below key levels that they won’t even be testing resistance anytime soon.
All this could change come Monday, when Aflac reports earnings … or the report could be a catalyst for another breakdown.
Stocks to Sell: 3M Co (MMM)
Click to Enlarge Diversified industrial 3M Co (MMM) is typically a market performer in February, but this year looks like it will weigh on the stock’s long-term average loss of 0.1%.
MMM stock made an unsuccessful test of its 200-day moving average at the end of 2015 before plummeting to start the year.
Despite a recent rally sparked by an earnings beat, the price momentum just isn’t there yet.
After making a recent death cross, MMM stock is testing resistance once again at the 200-day moving average — a level that 3M has struggled with for the better part of the past 52 weeks.
Sure, MMM could break through, but then, it doesn’t have a good track record of finding support.
Stocks to Sell: Norfolk Southern Corp. (NSC)
Click to Enlarge Like a wide swath of the market, the nation’s railroads are getting hit by the rout in prices for oil and other commodities. It’s gotten so bad for Norfolk Southern Corp. (NSC) that shares have lost about a third of their value over the past 52 weeks.
Unfortunately for anyone holding NSC stock, a range of metrics suggest even more losses ahead. Indeed, the Thomson Reuters Stock Reports price momentum rating on Norfolk Southern is at a three-year low.
NSC just made a death cross as shares tumbled so far below their moving averages that they won’t be testing them for some time. The stock is 16% below its 50-day MA and 18% below its 200-day MA.
And lastly, Norfolk Southern historically loses 0.4% in February.
Stocks to Sell: United Continental Holdings Inc (UAL)
Click to Enlarge United Continental Holdings Inc (UAL) stock peaked a year ago and except for a period of range-bound trading, it has been losing altitude ever since.
Making matters worse, UAL is flying into a horrible seasonal pattern.
On average, United suffers a loss of 8.3% in February. Even an above-average showing would still likely deliver some serious underperformance in the coming month.
In addition to being essentially trapped below its 200-day MA for eight months, the Thomson Reuters price momentum rating on UAL stock is at a three-year low. Shares made a death cross in mid-January and aren’t remotely close to their key moving averages.
Stocks to Sell: United Parcel Service, Inc. (UPS)
Click to Enlarge There was no Santa Claus rally for United Parcel Service, Inc. (UPS) stock last year. The stock tumbled through December and beyond, carving out a death cross and hitting a 52-week low along the way.
Shares are up smartly from that mid-month low but seasonality and technicals suggest current price momentum is really just a dead-cat bounce. UPS stock is well below its moving averages, and it hasn’t found definitive support at either level in more than a year.
With a seasonal average loss of 0.9% and a Thomson Reuters rating well below the market average, the bias on UPS is toward the downside this month.
Note: UPS will report earnings on Feb. 2.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
