After a terrible start to 2016, the market appears to abound with stocks to sell. Indeed, more often than not, January sets the tone for the trading year.
True, we’re hardly a week into the new year, and on a historical basis, the current month tends to be a good one for stocks. Over the long haul, the S&P 500 enjoys an average price gain of 1.2%, making it the fourth best month for stock performance, according to Yardeni Research.
That said, tactical investors should always be on the lookout for stocks to sell. Whether January eventually proves to be an up month or down, equities signaling upcoming price losses should always be pared from your portfolio.
A history of poor seasonality never bodes well for a stock in a month when the broader market tends to rise. Technical red flags — such as the sell signal of a death cross — are another characteristic of stocks to sell for the short term.
After screening the S&P 500 for technical weakness and unfavorable seasonality, we came up with a wide range of names that qualify as stocks to sell. From the tech sector to consumer discretionary stocks, these are the stocks that tactical investors should dump for January. (Charts courtesy of StockCharts.com.)
Stocks to Sell: Alliance Data Systems Corporation (ADS)
Over the last decade, ADS has lost an average of 1.9% in January and 1.3% in February, according to data from Thomson Reuters Stock Reports. Sure, past isn’t necessarily prologue, but there’s no question seasonality isn’t on its side.
If that weren’t enough of a warning bell, ADS is looking shaky on a technical basis, too.
Shares just carved out a death cross, which indicates more losses to come. The stock is also trading about 5% below both its 50- and 200-day moving averages. In other words, it has a lot of catching up to do before the technicals look favorable.
Stocks to Sell: Cisco Systems, Inc. (CSCO)
Shares busted below their 50- and 200-day moving averages in mid-November and have been unable to right themselves ever since.
Indeed, Cisco stock has repeatedly found resistance at its 50-DMA and a failed breakout at the end of December was soon followed by a death cross. Shares now trade at levels last seen in September, when they were struggling to come back from a 52-week low.
Neither is seasonality on the side of Cisco. The stock has lost an average of 0.6% in January and another 0.3% in February.
Stocks to Sell: EMC Corporation (EMC)
Dell announced its $67 billion acquisition of EMC in September, but the marriage is so complicated — and the potential tax bill so high — analysts fear it may never close.
The pessimism has put EMC in a technically poor position. The stock head-faked a breakout in early December — it even briefly made a golden cross — but it has found nothing but resistance ever since. By Christmas, it found itself making a death cross.
EMC doesn’t trade well this time of year anyway. Going back 10 years, the stock has lost an average of 0.9% in January.
Stocks to Sell: ExxonMobil Corporation (XOM)
Click to Enlarge You don’t need poor seasonality and technical warning signs to bail out of energy stocks these days. The price of crude oil alone is enough to be bearish. Put it all together, and ExxonMobil Corporation (XOM) is set for further loses in the near term.
On a seasonal basis, XOM stumbles out of the gate and the downtrend only accelerates from there. The stock has lost an average of 0.5% in January over the past decade, and then another 1.3% the following month.
XOM was on the cusp of a breakout around the holidays, but resistance at the 50- and 200-DMA put an end to that.
Heck, rather than a break out, XOM fell into a death cross.
Stocks to Sell: Hasbro, Inc. (HAS)
Over the last 10 years, HAS has lost an average of 0.3% in January before rebounding sharply over the next two months. And now HAS is setting up to do that again.
In a troubling move, HAS blasted below its 50- and 200-DMA in just a handful of sessions. Shares soon fell to lows last seen in April and then formed a death cross to kick off the new year.
On the plus side, HAS has been crushing the broader market over the last 52 weeks, and its long-term uptrend remains on track. But tactical investors should know that January looks weak.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.