Finding stocks to sell shouldn’t be too hard at this time of year. The set-it-and-forget-it market comes to an end in February after a four-month period when stocks historically put up strong gains.
With the market’s track record stacked against you, it’s imperative to find stocks to sell for February that threaten to scuttle your returns. After all, even if you manage to match market performance for the month, there’s still a good chance you’ll be looking at a loss.
As usual, there’s no shortage of stocks in the S&P 500 waving technical red flags with a history of poor seasonality. When a stock violates key levels and all its price momentum is to the downside — well, that name probably belongs on a list of stocks to sell.
We scoured the S&P 500 for stocks to sell based on technical weakness and other factors, looking for the most likely candidates to weigh on the broader market in February. Here are five stocks to sell based on the results:
5 Stocks to Sell for February: Caterpillar Inc. (CAT)
Click to Enlarge Caterpillar Inc. (NYSE:CAT) actually has an OK track record for seasonality in February, putting up an average gain of 0.6%. Ordinarily, that would make it a good bet for the month, but these are not ordinary times for the world’s largest maker of mining and construction equipment.
As CAT noted in its most recent earnings report, it’s getting beaten up from all sides. It doubled down on mining at precisely the same time as the commodity supercycle came to an end. The strongest dollar in a decade is playing havoc with revenue for this sprawling multinational.
And if that weren’t enough, tumbling prices for oil have further sapped demand for CAT gear.
CAT stock carved out a death cross in October and it still looks to be in force. Indeed, shares are down nearly 20% over the last three months, breaking down through CAT’s 50- and 200-day moving averages along the way.
You can add this blue chip to any list of stocks to sell.
5 Stocks to Sell in February: Amazon.com, Inc. (AMZN)
Click to Enlarge It’s easy to come up with fundamental reasons to sell Amazon.com, Inc. (NASDAQ:AMZN) stock. Minuscule margins, a lack of profits — and now the technicals are lining up against it, too.
Plenty of retail stocks take a hit in February as they enter the slowest period of the year for shopping and AMZN has been no exception. Over the last decade, AMZN has lost an average of 2% over the course of the month.
More worrisome is that the technicals have AMZN bottled up in a long-term downtrend.
AMZN’s 200-day moving average has been in decline since early 2014 — a sign of a sick stock. At the same time, AMZN can’t break out above either its 50- or 200-day moving averages for more than a couple weeks at a time, tops.
If those lines continue to offer resistance, AMZN is doomed to more price erosion.
5 Stocks to Sell in February: American Express Company (AXP)
Click to Enlarge American Express Company (NYSE:AXP) is off 5% over the last 52 weeks and the selling pressure is just getting started. It recently collapsed far below its 50- and 200-day moving averages and is on the cusp of carving out a death cross.
More bitterly for AXP technical bulls, the stock looked poised for an extended rally at the end of 2014. The stock put up terrific gains out of the broad market selloff of October and then described a golden cross just before Christmas.
The momentum was not to last. For the year-to-date, AXP is down 11% already and counting. Price momentum is to the downside and it has no positive seasonality to speak off.
Historically, AXP falls 2% in February. Fundamentally, the Street is worried about AXP’s ability to control expenses amid rising competition — as it should be.
Add it up and AXP belongs to the category of stocks to sell for February.
5 Stocks to Sell for February: Discover Financial Services (DFS)
Click to Enlarge To be fair to AXP, the consumption hangover following the holidays into February is tough on pretty much all payments processors, and Discover Financial Services (NYSE:DFS) has been no exception.
It’s just not the season to own this stock — not when it tends to lose 1.7% over the course of the month.
This year’s February performance could be even worse given DFS’s weak technicals. Like AXP, DFS ended last year with some promising momentum, but 2015 has so far turned out to be a huge dud. DFS is down 15% since Jan. 1 and the way the technicals are going, there’s more pain ahead.
Shares are well below their moving averages, and those happen to be on a collision course for a death cross. Higher loan reserves contributed to a 33% drop in quarterly income at DFS, as did a significant decline in revenue. Oh, and expenses increased, as well.
Between the earnings miss and the quicksand of the technicals, DFS is a goner for February.
5 Stocks to Sell for February: Wynn Resorts, Limited (WYNN)
Click to Enlarge Wynn Resorts, Limited (NASDAQ:WYNN) has been in steep decline going back to March of last year, and there’s no reason to think the casino operator will get off the schnide in February. Things are so bad, CEO Steve Wynn even took a pay cut.
WYNN has a history of losses in February as it is. Over the last decade, the stock has sustained an average loss of 3.2%. This year, however, could be much worse.
WYNN is getting hammered by slower growth in China, as well as Beijing tightening and enforcing of travel and capital flow regulations.
The fundamentals have soured sentiment on this stock and the techncials only add to the selling pressure. The 200-day is in a long-term downtrend and the 50-day marked a death cross in August.
At the same time, WYNN can’t break resistance at the 5o-day, dooming it to further declines.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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