Stocks have posted an impressive rally out of the Feb. 11 lows, fueled initially by hopes of an OPEC/non-OPEC crude oil supply freeze deal, and sustained by dovish policy turn by the Federal Reserve. Last week, Fed officials cut its rate hike forecast for 2016 in half to just two quarter-point hikes.
On the surface, this is everything the bulls could’ve hoped for. The problem is that the Dow Jones Industrial Average is rapidly nearing a three-year resistance range near the 18,000 level — which was first reached in late 2014 and last tested in July.
But just as stocks are approaching this level, sellers are coming out of the woodwork. Now the number of net advancing issues have declined steadily over the last few weeks.
As a result, I’ve been recommending clients maintain a defensive posture, raising cash and focusing on a few short-side plays. To that end, here are seven stocks to sell over the coming days.
Rotten-Egg Stocks to Sell: Amazon.com. Inc, (AMZN)
Online retail giant Amazon (AMZN) has been sliding since late December, as disappointing earnings and questions about the company’s rapid hiring and mixed success in digital devices resulted in some profit-taking after an impressive uptrend in 2015.
With AMZN once again falling below its 200-day moving average, watch for a test of the February low near $480.
Already, the April $560 AMZN puts I’ve recommended to Edge Pro subscribers are up nearly 50% since added on March 16.
Rotten-Egg Stocks to Sell: Teva Pharmaceutical Industries Ltd (ADR) (TEVA)
Teva Pharmaceutical (TEVA) shares, as well as biotech and Big Pharma stocks in general, have been on the slide since last summer. The momentum that fueled an uptrend gave way at first to reasoned profit-taking before panic and fear set in.
Mainly, political and regulatory pressure against the industry has popped the “baby boomers will spend anything to stay alive” meme.
TEVA is at risk of falling below a support level going all the way back to late 2014 near $54 a share — setting up a drop into the low $40s.
Rotten-Egg Stocks to Sell: Celgene Corporation (CELG)
Like Teva Pharmaceutical, Celgene (CELG) shares have been sliding lower since last summer as investors have lost faith. The $100-a-share level was first reached in late 2014. And a break below recent lows near $95 looks likely as the sector continues to be plagued by relative weakness.
The company will next report results on April 28 before the bell. Analysts are looking for earnings of $1.28 per share on revenues of $2.6 billion.
Rotten-Egg Stocks to Sell: Exxon Mobil Corporation (XOM)
With OPEC delaying its production freeze meeting to April — amid ongoing discussions over whether to allow Iranian output to surge to pre-sanctions levels — and West Texas Intermediate crude hitting resistance at its 200-day moving average, energy stocks like Exxon Mobile (XOM) look vulnerable to a pullback here after a solid three-month advance.
XOM is also contending with overhead resistance near $86-$85 a share going back to the high set in November. Watch for a drop back to the 200-day moving average near $78.
Rotten-Egg Stocks to Sell: Walt Disney Co (DIS)
Disney (DIS) shares were hit hard since peaking in August on concerns over “cord cutting” slamming its television business. Moreover, the hype over the new Star Wars movie has come and gone. And guess what? The Earth didn’t shatter.
The general consensus was that it was a glossed up, remixed version of A New Hope. Kids still seem more preoccupied with Steve of “Minecraft” than Ray and Finn of “Star Wars: The Force Awakens”.
With DIS stalling out near $100, watch for a possible retest of the February low near $87.50.
Rotten-Egg Stocks to Sell: Twitter Inc (TWTR)
Twitter (TWTR) shares have been on the decline since early 2014 amid growing doubts about the company’s user engagement and business model. Fresh lows near $14-a-share were set back in February, and with the stock stalling near its 50-day moving average, a test of fresh lows looks likely.
Twitter will next report results on April 26, with analysts looking for earnings of 10 cents per share on revenues of $607.5 million.
Rotten-Egg Stocks to Sell: Netflix, Inc. (NFLX)
Online streaming icon Netflix (NFLX) has been under pressure after double topping near $130 last year as its U.S. subscriber additions have seemed to slowed.
Competition is heating up, with Amazon and others getting in on the action with original content. Shares are stalling near the $100-a-share level with a break of the 20-day moving average and a test of the February low looking likely.
As a result, I have recommended the April $95 NFLX puts to my Edge Pro subscribers.