Get Out Before It’s Too Late
Despite high unemployment, a shaky U.S. economy with talk of a double-dip recession, and more debt crises in Europe, stocks enjoyed one of the best Octobers on record. However, with earnings of most of the big movers of the S&P 500 now reported, the focus of investors has again turned to Europe, and the picture is not good. In addition to the massive problems in Greece, Spain and Italy, China’s inflation rate has caused their leaders to tighten credit, which could have a nasty impact on the West.
The names on this month’s list of stocks to sell are from sectors that will be negatively impacted by the continuing problems in Europe, along with another slowdown in the United States and Asia. Banks and financial services are high on the list of those that would be hit again. But building industry stocks, especially those that have rallied recently, are also subject to heavy selling. And companies that have been beneficiaries of the early run for solar power are now paying the price of oversupply and competition.
Here is our list of stocks to sell in November:
Stock to Sell #1 – Altera Corp. (ALTR)
Semiconductor company Altera Corp. (NASDAQ:ALTR) reported Q3 earnings that came in below revised analysts’ estimates, so estimates for Q4 and 2012 have been lowered.
The stock recovered from its low of almost $30 in late September, and broke into its former recovery channel triggering a stochastic buy signal. However, it is approaching significant resistance at its 200-day moving average above $40 and insiders have been strong sellers. Sell ALTR at the market since a further advance is unlikely.
Stock to Sell #2 – Goldman Sachs (GS)
Goldman Sachs (NYSE:GS) is recognized as one of the world’s leading investment banking and securities firms. But legal, economic and market conditions have resulted in three years of lower earnings, and recent investigations by the government have led to more declines and heavy insider selling.
The recent jump in price reversed down at the bearish resistance line and triple-top at around $117, and the stock fell to its 50-day moving average (blue line). Note the strong sell signal from the stochastic. A break of the blue line would most likely lead to a test of its low. Sell GS at the market. Alternatively, you could write calls or buy puts to protect current holdings. The downside target for GS is under $90.
Stock to Sell #3 – Bank of America(BAC)
Bank of America (NYSE:BAC) provides a range of banking and non-banking financial services and products in the United States and abroad. The international financial crisis drove the banking sector to extreme lows and BAC crumbled to almost $5 in early October.
The stock made a slow recovery back to its bearish resistance line at over $7, but late in October, it reversed and fell below its 50-day moving average (blue line). Note the strong sell signal from the stochastic. And the stock has been the subject of very strong insider selling.
Present owners may wish to hold the stock for a long-term recovery, but should sell calls on present positions or buy put options. The downside target for BAC is $5.
Stock to Sell #4 – Capstead Mortgage Corp. (CMO)
Self-managed real estate investment trust (REIT) Capstead Mortgage Corp. (NYSE:CMO) earns income from investing in leveraged portfolios of residential mortgage pass-through securities. Recent data indicates that holders of prime jumbo mortgages are at risk, and analysts have recently decreased their target for CMO and other mortgage REITs. Thus, the high dividend yield of CMO and its price could fall.
The stock rallied from a low of $10 in October to over $12, but is approaching a significant zone of resistance between $12 and $13. Sell this and other mortgage-based REITs on rallies.
Stock to Sell #5 – Ryland Group (RYL)
Ryland Group (NYSE:RYL) is among the largest of the U.S. homebuilders and has an extensive mortgage operation. S&P sees Ryland “surviving the current downturn in the housing market,” but they also see prolonged weakness in the sector. The company is “cash poor” and at a disadvantage to its competition.
The recent recovery to its bearish resistance line at $14 gives current holders an opportunity to recover some of their losses, but a further meaningful advance is unlikely until the overall housing market recovers. Note the strong sell signal from the stochastic and the near-term support line at $13. Expect a sell-off to the next support zone at $10 to $11.
Stock to Sell #6 – SunPower Corp. (SPWRA)
SunPower Corp. (NASDAQ:SPWRA) reported a Q3 loss and reduced its outlook for 2011. Intense foreign competition has resulted in a huge loss for the California-based solar panel maker. Oversupply, especially from Asia, has driven many solar companies out of business, and SunPower is attempting to reorganize into other businesses in order to combat the trend. But such a move in a slow economy will be difficult, and the stock’s price will probably break its low.
In early November, the stock fell from a recovery high at its 50-day moving average (blue line). Note the strong sell signal from the stochastic and strong insider selling. Sell SPWRA at the market.
