After a multiweek reprieve, stocks were on the slide again Tuesday as the multitude of building worries finally encouraged traders to hit the sell button — especially among typically rock-solid blue-chip stocks.
These include the results of the Greek election over the weekend, ushering in the leftist anti-bailout/anti-austerity Syriza party — setting the stage for a showdown with the establishment and a possible exit from the eurozone. We’ve also seen a muted reaction to the European Central Bank’s sovereign QE program, ongoing pressure on crude oil, disappointing U.S. earnings, a slowdown in U.S. economic data, increased frightening in Ukraine and the approach of the Federal Reserve’s first rate hike since 2006.
As a result, the selling pressure that has been building since December (which measures of market breadth last peaked) is once again washing over the market — pulling down a number of widely held, blue-chip stocks including a number of Dow Jones Industrial Average components.
Here are five blue-chip stocks to sell if you’re long, or to short or play with puts if you’re looking to profit from the declines.
Blue-Chip Stocks to Sell: Intel Corporation (INTC)
Click to Enlarge Intel Corporation (NASDAQ:INTC), like many Dow components, suffered a gap move lower on Tuesday that pushed shares to levels not seen since November. That represents a 50% retracement of the October-to-December surge, wiping away months of gains in an instant. The company got hit in sympathy with the slamming Microsoft (NASDAQ:MSFT) received after reporting disappointing quarterly results.
The Feb $37 puts I recommended to Edge Pro subscribers back on Jan. 14 are up 71% already, with room for much more.
Blue-Chip Stocks to Sell: Cisco Systems, Inc. (CSCO)
Click to Enlarge Cisco Systems, Inc. (NASDAQ:CSCO), like Intel, suffered a gap move lower as the entire tech sector weakened. Shares have been topping since early December after an impressive 27% rally off of its October lows. But it’s time for some profit taking ahead of earnings on Feb. 11.
A 50% retracement to take the stock back to its 200-day average near $25 is the likely destination. That would be a 7%-plus decline from here.
Blue-Chip Stocks to Sell: Caterpillar Inc. (CAT)
Click to Enlarge Heavy equipment maker Caterpillar Inc. (NYSE:CAT) just can’t get out of the mud, breaking to fresh lows on Tuesday to return to mid-2013 levels. Shares are now down 27% from the high set in July — which coincidentally is when the majority of the stock market (as measured by the NYSE Composite) peaked.
CAT stock has been pummeled as global economic growth forecasts have been revised lower on weakening outlooks in Europe and Asia. And now, with U.S. durable goods orders disappointing on Tuesday, it looks like America is slowing too.
CAT has been a frequent put option play for Edge Pro subscribers in recent months, including a sequence between Dec. 31 and Jan. 13 that bagged a 226% gain.
Blue-Chip Stocks to Sell: Procter & Gamble Co (PG)
Click to Enlarge Home and beauty products maker Procter & Gamble Co (NYSE:PG) saw shares gap all the way down to October levels on Tuesday in a demonstration of just how rapidly gains can disappear when market volatility appears.
The company reported disappointing earnings before the bell, missing on both earnings and revenues. Forward guidance was also lowered on the impact of the stronger dollar, which reduces the value of foreign profits when repatriated.
Blue-Chip Stocks to Sell: Walt Disney Co (DIS)
The success of its movie franchise thanks to acquisitions has kept investors interested in pumping up the stock, which hasn’t tested below its 50-week moving average in five years. Shares have more than tripled in value over this time.
Yet, a topping pattern has been building since November that could result in, at the very least, a test of the 200-day MA. The measles outbreaks at its theme parks could be the negative catalyst required to encourage profit taking. Also, earnings are due on Feb. 3.
In response, yesterday I recommended Edge Pro subscribers move into the Feb $94 puts, which are poised to double on merely a test of the December lows.