U.S. equities slumped into the close Wednesday as another 10% tariff on $200 billion worth of Chinese imports Tuesday night reestablished trade war fears in investors’ minds. The Trump administration’s continued hawkishness overshadowed any lingering enthusiasm from Friday’s “Goldilocks” jobs report, which featured better-than-expected payroll gains but a bump in the unemployment rate.
This looks to be the start of a protracted pullback, with Beijing poised to respond with non-trade measures such as a crackdown on cross-border deal flow and consumer-led boycotts.
Checking in with SentimenTrader, they highlight that the S&P 500 gained more than 0.75% in the three days heading into Tuesday’s session. Then, stocks gained less than 0.5%. Since 1982, that’s happened nine other times. In only one instance did stocks move higher 30 days later, with an average return of -3.8%.
With equities poised to move lower, these five stocks look especially vulnerable due to their overbought condition:
Overbought Stocks to Sell: Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) shares are contending with triple-top resistance near $102 that turned shares lower back in June. The company has been a beneficiary of the persistent obsession with big-cap technology stocks. Now, however, Microsoft is at risk of a bout of profit-taking.
The company will next report results on July 19 after the close. Analysts are looking for earnings of $1.08 per share on revenues of $29.2 billion. When the company last reported on April 26, earnings of 95 cents per share beat estimates by 10 cents on a 15.5% rise in revenues.
Overbought Stocks to Sell: Apple (AAPL)
Apple (NASDAQ:AAPL) shares failed to test the early June highs during the latest rally, setting up a violation of its 50-day moving average to the downside.
There is some concern the company is vulnerable to a worsening trade standoff with China, as the company manufactures its phones there (via contractors) and relies on end-user demand from Chinese buyers to bolster iPhone sales.
The company will next report results on July 31 after the close. Analysts are looking for earnings of $2.18 per share on revenues of $52.4 billion. When the company last reported on May 1, earnings of $2.73 beat estimates by five cents on a 15.6% rise in revenues.
Overbought Stocks to Sell: Wells Fargo (WFC)
Wells Fargo (NYSE:WFC) shares have stalled after pushing above their 200-day moving average, threatening a return to the lower end of a three-month consolidation range.
Big bank earnings are due to start flowing out later this week, with investors keen to see how higher interest rates will impact loan demand and mortgage originations. It’s not likely to be good news.
The company will next report results on July 13 before the bell. Analysts are looking for earnings of $1.12 per share on revenues of $21.7 billion. When the company last reported results on April 13, earnings of $1.12 per share beat estimates by five cents on a 1.4% drop in revenues.
Overbought Stocks to Sell: Facebook (FB)
Facebook (NASDAQ:FB) shares have paused after attempted a breaking attempt to new record highs above the $200-a-share threshold. This represents a gain of roughly a third from the lows seen back in April amid the fallout from the Cambridge Analytica data scandal. Investors have quickly forgotten all about that.
But they shouldn’t forget that the company has failed to get a foothold in China following a 2009 riot in which activists used the social network to coordinate.
The company will next report results on July 25 after the close. Analysts are looking for earnings of $1.67 per share on revenues of $13.31 billion. When the company last reported on April 25, earnings of $1.69 beat estimates by 36 cents on a 49% rise in revenues.
Overbought Stocks to Sell: AT&T (T)
AT&T (NYSE:T) shares haven’t really done much despite the approval of its purchase of Time Warner, pushing shares back toward its 50-day moving average.
The company has been in the news for other M&A activity as well this week, including the purchase of security firm AlienVault and an agreement to sell Magic Leap’s augmented reality system. But industry headwinds, despite consolidation with media players, remain severe.
The company will next report results on July 24 after the close. Analysts are looking for earnings of 89 cents per share on revenues of $38.5 billion. When the company last reported on April 25, earnings of 85 cents per share missed estimates by three cents on a 3.4% decline in revenue.
Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
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