With the major indices now below their 200-day moving averages,
there has been significant technical damage. Rallies will most
likely be contained by the conjunction of a falling 50-day moving
average and a rising 200-day moving average for each
The market is now in a short- and intermediate-term decline,
and the last day of the June puts the long-term trend on the edge
of a cliff.
That is why it is more important than ever to pick the right
stocks to buy and sell. Here are my top stocks to buy and sell
for the month of July. Plus, I'll throw in an ETF that will help
protect your portfolio if the market plunges further.
Stock to Buy: AmerisourceBergen Corp. (
Pharmaceuticals service and drug distribution company,
), has been in a steady bull channel supported by the 50-day
for over a year. The stock is up more than 80% since its low in
March 2009, and now appears to be getting stronger as the
stochastic is turning up, which is a positive sign, and upside
ABC's growth record has outpaced the industry average of
10.2%, but despite that, it has a P/E ratio of just 16.36 versus
the industry average of 16.87, giving it better price
appreciation potential than its peers. Furthermore, earnings
growth of over 32% has made ABC an institutional
Our technical target is $40, and The Street rates it a "buy,"
as does S&P, which has a 12-month target of $36.
Stock to Buy: Cliffs Natural Resources (
Cliffs Natural Resources Inc.
) produces metallurgical coal and is the largest provider of iron
ore pellets to the North American steel industry.
Since its low in February 2009, CLF had a steady run until a
big breakout early this year, which vaulted the stock from $55 to
$75 in six weeks. A normal correction brought the stock back to
at $50, where it
with two support buy signals from our proprietary indicator, the
Collins-Bollinger Reversal (
Technically, the stock should break
at $60 with a trading target of $70. Longer term, S&P rates
CLF a "four-star buy with a 12-month target of $78.
Test your technical analysis IQ.
Stock to Buy: Health Management Associates (
Health Management Associates, Inc.
) owns and operates general acute-care hospitals in non-urban
areas of the southeastern United States.
The stock has been consolidating since March 2010, following a
major break from a
at $8. The chart doesn't show it, but the first peak of the top
in June 2008 was matched in October 2009. It now rests near
support at its 200-day moving average, and on June 25, HMA
flashed a buy signal from the slow stochastic.
The recent acquisition of three hospitals should allow HMA to
continue its growth rate and give it additional exposure to the
Both Credit Suisse Equity Research and S&P recommend HMA
with a 12-month target of $11. Technically, if the stock can
break from its 50-day moving average at $9, look for a quick run
to $11 and possibly beyond.
Stock to Buy: Illumina (
) is a world leader in genetic analysis technology, developing
innovative array-based tools for the large-scale analysis of
genetic material. Sales are expected to rise 22% this year on
"continued robust sales of sequencing instruments," and earnings
are estimated at $1 by S&P.
On June 10, the stock broke from a
at $45, and flashed a stochastic buy signal following a cluster
of buy signals from our internal CBR indicator.
If ILMN can break its June high, look for a run to over $52.
S&P's rates the stock a "four-star buy" with a 12-month
target of $50.
5 Ways to Tell a Stock is Headed Up
Stock to Sell: Research In Motion (
Research In Motion Limited
) reported a 20% increase in quarterly profits on June 25, and a
plan to buy back 31 million shares. But shipments are down, and
sales have been hurt by the success of the
) iPhone. Even though many research firms have jumped to defend
RIMM's earnings results, it is apparent that the marketplace is
saying something else.
Technically, the breakdown of the stock through a big
with a breakaway gap on huge volume is a killer. If you own this
stock, sell it on a rally.
For those who are interested in shorting RIMM, also wait for a
rally to do so, since the gap at $58.29 to $55.14 could be
filled. It would be wise to short a half position now and a full
position if the gap is closed.
As usual, always use a stop-loss (buy limit) to protect
against the risk of a major rally, and contact your broker to
borrow shares before entering a short sale. This is a high-risk
recommendation that is only suitable for traders.
ETF to Buy: ProShares Short Dow 30
ProShares Short Dow 30
) is an exchange-traded fund (
) that seeks to mirror the inverse daily performance of the Dow
Jones Industrial Average. With the major indices acting anemic,
DOG provides a way to insure portfolios against a major
breakdown, and could even give traders a quick profit without a
major breakdown of the parent index.
The Dow is currently finding support at 10,000, and then
9,800. But if it fails to hold at 9,800, then look out below,
because a 1,000-point decline to 9,000 is possible, and that
would likely result in a run to the $60s for DOG.
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