Get ready. Things might get ugly soon.
We’re heading into the second month of what is typically the worst two months of the year for the markets. September is upon us, and looking back to 1990, the S&P 500 has only finished this month in the green 48% of the time. The other 52% of the time, the benchmark index registered losses averaging 0.7%.
I know, that doesn’t sound like a lot. But it makes September the worst month for returns across the whole year. Not to mention that average is made up of several dreadful single-stock performances.
That’s good enough reason for investors to be cautious in September. Today, we’re taking a moment to identify seven stocks that appear to be on the edge of significant breakdowns as we hit this traditionally weak month.
Stocks That Could Collapse Soon: Advanced Micro Devices (AMD)
Click to Enlarge The semiconductor is turning into one of the biggest industries of haves and have-nots, as the companies within the sector feel like they are carving their own path of performance instead of moving like a group.
Advanced Micro Devices, Inc. (NASDAQ:AMD) has been one of the have-nots. Shares are reversing their gains for the year and challenging critical technical support. AMD has spent the past three months bouncing from support from the stock’s 10-month moving average.
This month, the stock will narrowly miss a close below this trendline, but expect September to start with another challenge.
The last time AMD broke this long-term support level was in 2014 ahead of a 50% decline in share value. Right now, we’re targeting the potential for a move to $9 — which would be a 30%-plus loss from here.
Stocks That Could Collapse Soon: Bank of America (BAC)
Click to Enlarge The wishy-washy uncertainty surrounding any regulatory change from Congress and the White House has financial stocks floundering and testing support. Bank of America Corp (NYSE:BAC) is one of the stocks we’re keeping a close eye on as we head into September.
Like Advanced Micro Devices, Bank of America is testing its 10-month moving average at $23 — and as of Friday, Sept. 8, it opened a hair below that mark. A sustained break below this key support will be the first since January 2016, when the stock was moving from $16 to $11.
Seasonality is a headwind for Bank of America, too, as the stock averages a performance of -1.8% in September over the past 20 years. Similarly, BAC has finished in positive territory for the month only 32% of the time.
Watch for Bank of America shares to target $20, a 16% decline, over the intermediate-term on seasonal and technical weakness.
Stocks That Could Collapse Soon: Ford (F)
Ford has rallied nicely by about 5% over the past few weeks, but it has now been pushed to a technical test that shares simply must pass. Ford’s 50-day moving average currently sits at $11.05, which should add pressure. A reversal from this price from profit-taking would likely force a test of $10.50 again, and from there, things could get even worse.
Ford is another stock that faces a seasonal headwind in September. In addition, the revenue trend for the automaker continues to suffer, indicating that the upcoming earnings season may be tough.
Our models target a technical move to $9, or about 18% lower.
Stocks That Could Collapse Soon: General Electric (GE)
Click to Enlarge General Electric Company (NYSE:GE) is the example of what can happen to stocks when they break their long-term technical support. GE shares have lost 15% in short order and continue to show no signs of turning around.
We’ve seen analysts change their outlook on General Electric to the point where only 45% of those tracking the stock maintain a buy recommendation, but we’re expecting more in the way of downgrades.
General Electric is in the process of testing round-numbered chart support at $24 — right where the stock is trading as of Friday morning, Sept. 8. This level has been historically strong as support and resistance so we expect a break lower to trigger another round of selling. Right now, the seasonality is enough to break $24, in which case we target a move of about 18% lower to $20 per share.
Stocks That Could Collapse Soon: BlackBerry (BBRY)
The stock had a surge in April and May as some positive outcome on legal matters helped investors take another look at the future of BBRY. This was quickly reversed when the reality of the company’s fundamentals as earnings set a negative trend in place again.
Now, Blackberry stock is making a familiar pattern of lower highs and lower lows as it approaches another test of its 200-day moving average. Failure at this important trendline will get the sellers moving and push the stock to our target of $8 — a descent of about 15%.
Stocks That Could Collapse Soon: Qualcomm (QCOM)
Click to Enlarge Another semiconductor stock that finds itself in the “have nots” camp is Qualcomm, Inc. (NASDAQ:QCOM). Year-to-date, shares are down nearly 20% while the semiconductor sector is up 23%. The poor performance has technical traders selling on each rally and the stock trading in a technical bear market.
QCOM stock was sitting right on critical chart support at $52.50 just a few days ago. The chart shows the historical strength of this price level as both support and resistance. This means a break below that price in September will see a selling surge.
Guess what? QCOM is now under that measure by a few dollars.
In a strange twist, Qualcomm actually performs relatively well in September. Over the last 20 years, the stock averages a return of +1.3% and finishes the month in positive territory 53% of the time. That’s one of the best seasonal performances of the stocks we’ve highlighted today.
Unfortunately, a break of $52.50 will allow the stock to fall to a likely target of $45, good for a 14% decline.
Stocks That Could Collapse Soon: GoPro (GPRO)
The stock got a huge boost following its last quarterly earnings report, which featured a number of surprises. That said, the overall trend of GoPro stock remains bearish, and we’re now seeing investors who were waiting to get out at prices not near all-time low doing exactly that.
From a chart perspective, GoPro shares remain in a long-term bear market, which was confirmed by the staunch resistance at the stock’s 20-month moving average this month. That price level is $10.75, for those tracking at home.
Barring another surprise from a company that continues to lack the innovative strength to muster higher valuations, we expect the trend to be unfriendly for GoPro. Expect that a move below $9 will accelerate the stock’s downside move and put it at risk of hitting a target price of $7.75. That would be a 16% decline from here.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.