Sell Before a Correction
Last month, the danger of European debt contagion, tensions in
Korea, and inflation in China were in focus. But late in January,
those concerns gave way to worries over political revolutions in
Tunisia, Egypt and other countries in the Middle East as
international oil companies could be threatened. As tensions grow,
investors should consider which stocks to sell. They would be wise
to cull both losers and stocks that have yielded major profits, as
well as those being downgraded by analysts since a normal
correction appears likely.
Where do the markets go from here? The markets gained slightly
last week, despite Moody's downgrading of Egyptian bonds, but with
8% of the world's goods and 3% of its oil sent through the Suez
Canal and Egypt's pipeline, there is reason for concern.
Technically, the next support for the Dow industrials is at the
20-day moving average at 11,883 with 11,740 being a stop-loss point
for traders. But 11,630 (50-day moving average) to 11,450 is the
major support zone, and a penetration of that zone would cause a
change in trend. The next support for the S&P 500 is at 1,271,
and then the major support zone at 1,260 (50-day moving average) to
The following are stocks to sell now:
Stock to Sell #1 - Coinstar Inc. (CSTR)
) is a provider of automated retail solutions and operates
self-service coin-counting machines.
The stock has broken from a
with a high-volume breakaway gap. Although meeting analysts'
earnings estimates, the company has had numerous legal problems. On
Friday, two firms filed class-action lawsuits against the company,
and the stock reacted with a technical breakdown. Sell CSTR at
Stock to Sell #2 - Equinix Inc. (EQIX)
) is global network neutral data center that operates 49
International Business Exchange (IBX) centers.
For Q3 2010, the company met the earnings estimates of 24
analysts covering the stock. But for each quarter, the consensus
estimate had been regularly reduced, and for Q4 2010, it has been
reduced to 23 cents - a 45% decrease over the prior year Q4.
Technically, the stock is in a broad channel down with the
stochastic now overbought. Sell EQIX at market.
Stock to Sell #3 - Newmont Mining (NEM)
) is one of the world's largest gold producers, and is also a
producer of copper.
Standard & Poor's rates NEM a "four-star buy," but recent
overbuying of gold by China and others has driven prices to record
highs where we should expect to see more profit-taking. Long-term
buyers of the stock should continue to hold, but traders and those
seeking short-term gains should cash in since the stock recently
issued a technical signal called a "death cross" (50-day and
200-day moving averages cross), which targets a decline to about
Stock to Sell #4 - PPL Corp. (PPL)
Energy and utility holding company
) generates electricity from power plants in the northeast United
States and some western states.
Although Q4 profits more than doubled, PPL missed its revenue
projection and fell short of analysts' estimates. Standard &
Poor's and other analysts have reduced PPL to a "hold," and
earnings estimates have been reduced. S&P targets the stock at
$28 within 12 months, so more aggressive investors should sell now
for better opportunities in other sectors.
Technically, the stock made another new low on Feb. 4, and
appears to be heading lower. The dividend of $1.40 currently
appears to be safe, so income investors may want to hold the stock,
but others should sell.
Stock to Sell #5- Qiagen NV (QGEN)
) is a biotech holding company that provides technologies and
products for analytical preparations. Several analysts, including
Ford Equity and Standard and Poor's, have cut their rating on the
stock and reduced the 12-month target from $24 to $21.
Technically, the stock is in a recovery channel, but is below
both its 50-day and 200-day moving averages, and thus, is still in
a bear market. A violation of $18 would likely lead to much lower
levels. Sell at market.