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6 Stocks to Sell in January

Take advantage of the December-to-early-January bounce by selling non-performers

By Sam Collins, InvestorPlace Chief Technical Analyst

Get a Fresh Start This New Year

Even though the economy appears to be gradually improving, global issues have yet to be fully addressed. Thus, the wide swings in the market generated by headlines are likely to remain a challenge for traders and investors alike.

The “Santa rally” appears to be over, but stocks did rally enough to change the intermediate trend from down to up; however, the overall market is still in a long-term downtrend.

This year, the trading range of the S&P 500 could be as broad as 1,140 to 1,440. So, at current prices, holders of non-performing stocks should take advantage of the December-to-early-January bounce and rid themselves of losers to accumulate cash or purchase high-yielding quality issues.

Here is our list of stocks to sell in January:

Stock to Sell #1 – Bio-Reference Laboratories (BRLI)

Bio-Reference Laboratories (NASDAQ:BRLI) provides clinical laboratory testing services for the detection, diagnosis, evaluation, monitoring and treatment of diseases in the greaterNew York metropolitan area and other urban areas.

The stock has risen from $12 to $17 as a result of an improvement in Q4 earnings. But gross margins have slipped, and so the recent rally provides an excellent opportunity to sell this stock at market.

Technically the stock is in a bear market channel with resistance at $19 and support at $14. The stochastic is overbought.

BRLI Chart
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Stock to Sell #2 – BMC Software (BMC)

BMC Software (NASDAQ:BMC) develops software that provides system and service management solutions for enterprises in theUnited States and internationally.

Although revenues are expected to increase 7.3% in FY 2012 (March), the company’s profits are limited by adverse foreign exchange, longer sales cycles, and weakness in the public sector.

Technically the stock is in a pronounced downtrend with resistance at $34 and no support in sight. The stochastic recently issued a sell signal. Sell at market.

BMC Chart
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Stock to Sell #3 – The Gap Inc. (GPS)

Global specialty retailer The Gap Inc. (NYSE:GPS) is expected to report 2012 earnings of $1.48 versus $1.88 in 2011. This lackluster performance is the result of margins contracting annually on promotional pricing and significant product cost inflation.

S&P expects earnings to increase to $1.75 in FY 2013, but the stock is running into significant overhead at the conjunction of its 50-day and 200-day moving averages at $19.

Stockholders who are resistant to selling GPS should consult their financial advisers for other methods to protect them from further declines. Writing calls against current positions might provide enough time for GPS to consolidate and move higher. Other investors should sell the stock at market.

GPS Chart
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Stock to Sell #4 – M.D.C. Holdings (MDC)

Construction services company M.D.C. Holdings (NYSE:MDC) manufactures single-family detached homes under the name Richmond American Homes and financial services under the name HomeAmerican Mortgage Corp. It has compiled five years of losses and “has been slow to adapt to a difficult housing market,” according to S&P.

Technically the stock is in a pronounced bear market with resistance at just under $22. A break at $16 would confirm a head-and-shoulders breakdown with a target of $11. Its recent rally from a low of $16 provides an excellent opportunity to sell this non-performer.

MDC Chart
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Stock to Sell #5 – Ternium (TX)

Ternium (NYSE:TX) is a Latin American steel maker. Its revenue growth significantly trails the industry average of 72.9%. Net income has decreased by over 95% versus the same quarter last year and its return on equity is low.

Technically TX is in a pronounced downtrend, and the recent rally from its low under $16 to $20 provides an excellent opportunity to sell the shares at the market. The downside target for TX is under $15.

TX Chart
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Stock to Sell #6 – Winnebago Industries (WGO)

Winnebago Industries (NYSE:WGO), a well-known maker of RVs and motor homes, is in a bear channel with resistance at the upper line of the channel at just over $8.

Earnings have been projected to be higher for several quarters, but each time the company has failed to meet forecasts. In fact, earnings have fallen for five consecutive quarters.

The stock is down almost 50% in 12 months. Even though it has rallied since touching the bottom line of its bear channel in November, it is unlikely that it can successfully attack the upper line of the channel or the 200-day moving average at just under $9. Sell WGO at market.

WGO Chart
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Article printed from InvestorPlace Media,

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