Finding stocks to sell in July is crucial, because the period is typically a good-but-not-great month for stocks.
That means any hope for outperformance in your personal portfolio hinges on identifying technically weak stocks to sell and jettisoning them now before they drag you down.
Over the last 67 years, the S&P 500 has returned an average of 0.91% in July, according to Yardeni Research. That puts the month’s returns squarely in the middle of the pack in regards to seasonality.
Like we said: good, but not great.
Against that backdrop, tactical and technically minded investors need to identify key S&P 500 stocks to sell, since these picks will weigh on their returns and hold back performance. After all, big names with no price momentum and a history of poor monthly performance aren’t going to do the broader market any good.
As stocks to sell for July, these names are no-brainers.
After screening the S&P 500 for stocks showing everything from price weakness to poor seasonality, we found a number of equities waving technical red flags. Based on technical weakness, here are five stocks to sell for July:
Stocks to Sell for July: Visa (V)
V stock is already down more than 6% for the year-to-date. Its massive $131 billion market cap is doing the financial sector and S&P 500 no favors.
If you haven’t dumped V stock yet, now is the time. The technicals say V stock offers nothing but more dead weight ahead and is a stock to sell.
All the price momentum is to the downside. On July 24, V stock closed 12% below its 52-week high to put it 0.9% below its 50-day moving average and 1.2% below its 200-day moving.
You won’t find any upside momentum in Visa’s relative strength indicator either. At just shy of 40, there’s no reason to play shares for an oversold bounce.
Worst of all, V stock has a terrible track record on seasonality. Based on 10 years of data compiled by Thomson Reuters Stock Reports, V stock delivers an average return of -1% in July, lagging the S&P 500 by nearly 2 percentage points.
Stocks to Sell for July: Peabody Energy (BTU)
BTU stock is down a miserable 17% for the year-to-date and broken technicals portend more ugliness in July.
As of the July 24 close, BTU stock closed 23% below its 52-week high. That left it 5.8% below its 50-day moving average and 7.3% below its 200-day moving average. Every time BTU looks set for a rally, the overarching downside momentum has it stall out.
Confirmation of the downside momentum — or at least a lack of upside momentum — can be found in BTU stock’s relative strength indicator, which is stuck in the “meh” territory of the low 40s.
Then there’s the unfortunate case that the market doesn’t much like BTU in the summer months. Historically, BTU stock lags the S&P 500 by nearly 0.4 percentage points in July before going on to lose almost 2% in August.
Stocks to Sell for July: Ross Stores (ROST)
Hey, when even a discount retailer like Wal-Mart (WMT) is struggling, what hope is there for the littler guy?
ROST stock has lost more than 11% for the year-to-date, recently closing a scary 19% below its 52-week high. ROST stock now trades more than 2% below its 50-day moving average and 7% below its 200-day moving average.
Breaking below those key technicals levels has left ROST sitting above an air pocket. With a relative strength indicator of 40, who’s going to play it as oversold? The momentum from this point on looks decidedly down.
The final technical strike against ROST stock is seasonality. On average, shares cough up a negative return of 2% in July, lagging the S&P 500 by almost 4 percentage points.
Stocks to Sell for July: IntercontinentalExchange (ICE)
Click to EnlargeIt’s no fun being an exchange operator when trading volumes for everything from commodities futures to equities are in the dumps. Just ask anyone holding IntercontinentalExchange (ICE) stock, which is off 15% so far this year.
You don’t need to look at technicals like seasonality to know that trading volumes dry up even more during the summer months. Maybe that’s why ICE stock historically loses an average of 4.7% in July.
And if that’s not enough to make ICE stock a sell for July, the downward momentum in price surely is.
ICE stock is 17% below its 52-week high, causing it to break 2.8% below its 50-day moving average and 6.5% below its 200-day moving average.
Compounding the downward pressure on ICE stock is a relative strength indicator of 44 — no man’s land at best.
Stocks to Sell for July: Diamond Offshore Drilling (DO)
It looks like it’s too late for even the recent rise in energy prices to help Diamond Offshore Drilling (DO). After all, even if better industry fundamentals stick, the technical damage has been done.
DO stock is down 15% on the year to sit 33% below its 52-week high. That’s tipped the price momentum firmly toward the downside.
DO stock just breached its 50-day moving average, and now trades below that key level by almost 3%. DO stock is more than 9% below its 200-day moving average.
Again, with a relative strength indicator of 46, there’s no technical reason to expect oversold support in DO stock.
Lastly, the summer months haven’t been kind to DO stock over the past decade. On average, DO stock generates a return of -0.1% in July and -1.4% in August, according to data compiled by Thomson Reuters Stock Reports.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.