Good riddance to April, which has been a crazy month for stocks. From flirting with a correction to notching new all-time highs, the market was too bipolar to get any kind of handle on what comes next.
At the same time, momentums stocks — the market darlings posting outsized gains — were disproportionately punished. Former high flyers like Netflix (NFLX), TripAdvisor (TRIP) and Twitter (TWTR) have been smacked down since the end of February, losing as much as 25% of their value.
Indeed, when the bottom fell out of momentum stocks, a number of names broke their technicals. That technical weakness — not to mention historical returns — doesn’t bode well for May.
You don’t have to sell everything in May and go away, but the technicals on these five names suggest more pain ahead.
Here are five stocks to sell in May:
Stocks to Sell: Facebook (FB)
Seasonality is against FB stock in May, with an implied loss for the month of more than 12%, according to Thomson Reuters Stock Reports. Although FB trades 9.4% above its 200-day moving average, it also trades 9.5% below its 50-day moving average.
FB stock is also 19.9% below its 52-week high, and relative strength doesn’t suggest any price momentum either. FB scores a 43 out of 100 on the Thomson Reuters Relative Strength Indicator. Not terrible — that’s in line with the industry, in fact — but it hardly screams oversold either.
Stocks to Sell: 3D Systems (DDD)
Click to EnlargeLike most 3D printing companies, 3D Systems (DDD) was also caught in the vortex of falling momentum stocks. As we noted, DDD earnings weren’t bad. They just failed to do anything to justify its sky-high valuation.
Now the technicals are aligned against 3D Systems, too. Seasonality hurts 3D Systems with an implied loss of 3.6% coming up in May, according to Thomson Reuters Stocks Reports. Additionally, DDD has pretty much no price momentum to speak of.
DDD shares are currently trading 25.5% below their 50-day moving average, and 31% below their 200-day moving average. DDD is also 53.9% below its 52-week high. Furthermore, DDD scores 37 out of 100 on the Thomson Reuters Relative Strength Indicator, which suggests more weakness ahead.
Stocks to Sell: LinkedIn (LNKD)
LNKD has an implied loss of more than 12% coming up in May, according to Thomson Reuters Stock Reports. Shares have also broken through support. LNKD shares are currently trading 18% below their 50-day moving average, and 29.2% below their 200-day moving average.
Furthermore, LNKD stock is off an astounding 40.5% from its 52-week high — and any relative strength just isn’t there. LNKD scores 36 out of 100 on the Thomson Reuters Relative Strength Indicator, which is well below the industry average of 43. LNKD in has been crushed as a momentum stock, but the technicals say this beaten-down darling is by no means a buy yet.
Stocks to Sell: Zynga (ZNGA)
Click to EnlargeZynga (ZNGA) is another name you need to jettison for May, as the technical negatives outweigh any positives for the online game company.Seasonality will actually get worse for this stock. ZNGA is looking at an implied loss of more than 9% in May, and another 15% decline in June, according to Thomson Reuters Stock Reports.
ZNGA shares are currently trading 17% below their 50-day moving average, and 0.1% above their 200-day moving average. ZNGA will likely break through the latter average, and perhaps find an air pocket below. It’s also 33% below its 52-week high.
Relative strength is not terrible for ZNGA, but neither does it portend any upside. ZNGA enters the month of May with a score of 42 out of 100 against an industry average of 43, according to Thomson Reuters’ Relative Strength Indicator.
Palo Alto Networks (PANW)
PANW is entering a seasonally terrible time, with an implied loss of 10.3% in May and 21.6% in June, according to Thomson Reuters Stock Reports. That in itself screams sell.
Other technicals are weak-to-mixed. PANW shares are currently trading 9.4% below their 50-day moving average and 14.4% above their 200-day average. PANW is also sitting 20.4% below its 52-week high.
Price momentum is working against PANW, but it does have better-than-average relative strength. PANW scores a 47 out of 100 on the Thomson Reuters Relative Strength Indicator. The industry average stands at 44. Still, the mixed fundamentals and ongoing shellacking of momentum stocks makes PANW a sell in May.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.