April hasn’t traditionally been the cruelest month for stock market performance, but the way equities are reeling out of March, investors would do well to get any shaky stocks to sell out of their portfolios now.
After all, the recent swoon has the broader market sitting at essentially breakeven for 2015.
If the market does continue to sell off, you can bet that stocks with weak technicals and poor seasonality will be leading the way. That makes such issues obvious selling candidates.
After screening the S&P 500 for technical red flags and a history of underperformance at this time of year, we found a number of stocks that look like they’re in for a bad April no matter what the broader market does. There’s little doubt these are stocks to sell now.
With that in mind, here are the top five S&P 500 stocks to sell for April:
S&P 500 Stocks to Sell: Alcoa Inc (AA)
Blame global economic weakness.
Alcoa has done an admirable job transitioning itself to a manufacturer of premium products for the aerospace and automobile industries, but it’s still an aluminum company at heart. A worldwide glut is pressuring prices and looks like it will only get worse. Heck, aluminum exports from China have jumped by 21% year-over-year through February.
That has changed the outlook on AA stock, and now it’s set for a period of declines. Alcoa shares were up as much as 8% for the year-to-date a month ago … but now they’re sitting on 18% losses, and more could be on the way.
AA stock crashed through support at both its 50- and 200-day moving averages at the end of February. Soon after, the stock described a death cross, and the selling has only accelerated since.
S&P 500 Stocks to Sell: Caterpillar Inc. (NYSE:CAT)
Click to Enlarge Caterpillar Inc. (NYSE:CAT) is another S&P 500 blue chip that’s getting clobbered by plunging prices stemming from the metals glut. Indeed, it has been getting killed by generalized softness in commodities for years. The slowdown in China was bad enough … and now that oil prices have tanked, there’s little hope for CAT stock.
On a seasonal basis, CAT has a strong April followed by a bad May. Given the weak technicals and fundamentals, we can expect that historically poor May run to start earlier this year.
CAT has been under increasing pressure ever since hitting a death cross last fall. Ever since CAT carved out that sell signal, shares haven’t come close to even testing resistance at their 50-day moving average.
At the same time, CAT is losing sight of its 200-day. It’s now about 18% below that key level, which is firmly in a downtrend.
That’s a sign of a sick stock.
S&P 500 Stocks to Sell: Fossil Group Inc (NASDAQ:FOSL)
Click to Enlarge Fossil Group Inc (NASDAQ:FOSL) is another S&P 500 name that historically waits until May to enter a period of weak seasonality, but the technicals suggest it will have a crummy April too.
Fossil had a rough fourth quarter amid slowing sales of watches and some other accessories and the market was unforgiving. Now that Apple Inc. (NASDAQ:AAPL) is launching a smart watch, some observers think the clock may be ticking on FOSL.
Shares have lost 30% over the last 52 weeks with no bottom in sight. FOSL fell through a floor on disappointing results. That created a death cross and the stock has been losing sight of its moving averages ever since.
Indeed, FOSL is now 31% below its 52-week high, 10% below its 50-day moving average, and 18% below its 200-day. There’s really no way this stock is testing resistance anytime soon.
Stocks to Sell: Ralph Lauren Corp (NYSE:RL)
Click to Enlarge Ralph Lauren Corp (NYSE:RL) is one of the worst-performing stocks in the S&P 500 so far this year, partly due to a terrible fiscal third-quarter earnings report and ugly outlook. True, the strong dollar is killing RL, but the U.S. wholesale numbers were poor too.
RL is down 30% for the year-to-date, and that’s just destroyed the technicals. The stock was looking like a winner at the end of last year, riding the strength of a golden cross. But now that’s all ancient history.
Ralph Lauren scrawled out a death cross not long after it plunged on quarterly earnings. As a result, RL stock isn’t even within sniffing distance of testing resistance. RL shares are currently trading 8% their 50-day moving average and 18% below their 200-day moving average.
Seasonality will soon become a factor too. April has a pretty good track record, but RL has lost an average of 0.3% in May over the last 10 years.
S&P 500 Stocks to Sell: NetApp Inc. (NASDAQ:NTAP)
Click to Enlarge NetApp Inc. (NASDAQ:NTAP) started March with the dreaded sell signal of a death cross and it’s not close to breaking the spell. Not when analysts are falling over themselves to downgrade the stock as competition mounts from all sides.
The storage equipment maker is getting squeezed in its core business of selling disk arrays from upstarts looking to grab market share, as well as cloud computing vendors (of which there is no shortage).
NTAP is off 7% for the year-to-date and all the momentum is to the downside after that death cross. Indeed, the stock is now more than 10% below its 200-day moving average, which itself is about to trend down.
As for seasonality, historically, NTAP stock is weak in March and loses ground in May, with April being an up month. Given the technicals this time around, April won’t be good for gains this time around.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.