Top 7 Trades for December

30 Dead Dividend Stocks to Avoid At All Costs[1]

Each month, I like to give OptionsZone readers my top stock picks for the month ahead. Using a combination of fundamental and technical analysis[2], I seek out the stocks I think offer investors the best opportunities to bank some nice profits in the weeks ahead.

These stock’s technicals say they’re likely to deliver short-terms gains for traders, while their fundamentals make them good candidates to hold for the long term.

Keep reading to get my top stocks for December.

Next: Top Stock #1

Top Stock #1: Deere & Company (DE)

30 Dead Dividend Stocks to Avoid At All Costs[1]

Deere & Company (DE[3]) manufactures agricultural equipment, and construction and forestry vehicles. Citigroup Global Markets has a “buy” rating on DE and raised its target to $62 saying, “We now apply a market multiple of 17x to our unchanged normalized EPS of $3.75.” And S&P rates the stock a “four-star buy” with a target of $65.

DE fell from a bull market high of more than $90 in April 2008, to less than $25 in March 2009. But it quickly sprang back and established a consolidation within one of the most followed bull market formations in modern times — the cup-and-handle[4]. On Nov. 17, DE broke cleanly from the formation, and my technical target is between $65 and $70.

Get 10 Tips to Getting Started With Technical Analysis[5].

Next: Top Stock #2

Top Stock #2: Advanced Micro Devices (AMD)

30 Dead Dividend Stocks to Avoid At All Costs[1]

Advanced Micro Devices (AMD[6]), a leading producer of semiconductors, entered into an agreement to drop ongoing legal disputes with Intel (INTC[7]), start a new five-year cross-license on x86 technology, and permit Global Foundries, AMD’s spin-off of its semiconductor manufacturing business, to exist as an independent entity, which will allow AMD to transform itself into a fabless semi company. INTC will pay AMD $1.25 billion. Credit Suisse said, “We view the settlement positively for both INTC (legal risk reduced) and AMD (stronger balance sheet).”

Semiconductor stocks have broken into a bull market, and AMD’s recent triple-top[8] breakout follows a major bottom punctuated by a gold cross in May. That, coupled with the high-volume breakaway gap, is a powerful signal. My trading target is $9.50 to $10, but longer-term investors may want to hold the given the favorable fundamental outlook mentioned above.

Next: Top Stock #3

Top Stock #3: Consolidated Communications Holdings (CNSL)

30 Dead Dividend Stocks to Avoid At All Costs[1]

Consolidated Communications Holdings (CNSL[9]) offers a range of telecommunications services. TheStreet.com rates CNSL a “buy” saying, “The company’s strengths can be seen in multiple areas, such as its compelling growth in net income, good cash flow from operations, notable return on equity, solid stock price performance and impressive record of earnings per share growth.”

Telecommunications was one of the few very strong sectors in November, and momentum for telecom stocks remains strong, indicating that the sector may head higher. CNSL has strong upside volume that is building after holding above its bullish support line[10]. The target for the stock is $18.

Learn 5 Ways to Tell a Stock is Headed Up[11].

Next: Top Stock #4

Top Stock #4: Dillard’s (DDS)

30 Dead Dividend Stocks to Avoid At All Costs[1]

Apparel and home furnishing retailer Dillard’s (DDS[12]) broke from a triple-top[8] following a two-month consolidation that was preceded by gold cross and powerful volume[13] as the stock regularly stepped up to new highs. The stock is currently under heavy accumulation with a target price in the mid-$20s.

Ford Equity Research rates the stock a “buy” saying, “We project that Dillard’s will outperform the market over the next six to 12 months. This projection is based on our analysis of three key factors that influence common stock performance: earnings strength, relative valuation and recent price movement.”

Test your technical analysis IQ.[14]

Next: Top Stock #5

Top Stock #5: iPath DJ-AIG Copper Total Return Sub-Index ETN

30 Dead Dividend Stocks to Avoid At All Costs[1]

The iPath DJ-AIG Copper Total Return Sub-Index ETN (JJC[15]) seeks results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones-AIG Copper Total Return Sub-Index. Like its parent, the copper spot futures contract, this ETN is in a powerful bull market, and some analysts use the index as an economic indicator.

Note that corrections in this asset are sometimes violent and accompanied by huge volume, which shakes out the weak holders. Recent buying plus a positive stochastic indicate that, despite rounds of profit-taking, the advance will most likely achieve a target of $50 to $55.

Learn how ETNs differ from ETFs.[16]

Next: Top Stock #6

Top Stock #6: iShares Silver Trust (SLV)

30 Dead Dividend Stocks to Avoid At All Costs[1]

The iShares Silver Trust (SLV[17]) is intended to be a simple and cost-effective means of investing in silver. The fund reflects the price of silver owned by the trust, less the trust’s expenses and liabilities.

Prior to the financial panic early this year, the silver-to-gold price ratio held for many years at about 55-to-1. But the panic “decoupled” the ratio. With gold now at about $1,175 an ounce and silver at $13.30, silver appears undervalued. So if gold were to maintain its current price or advance, and silver reestablishes its traditional ratio with gold, silver should be priced at more than $20 an ounce.

This trust could be an excellent vehicle for those who wish to invest in silver and believe that its traditional ratio with gold will be reestablished.

Learn how to trade commodity futures[18].

Next: Top Stock #7

Top Stock #7: UltraShort SmallCap 600 ProShares (SDD)

30 Dead Dividend Stocks to Avoid At All Costs[1]

The UltraShort SmallCap 600 ProShares (SDD[19]) seeks daily results, before fees and expenses, that correspond to twice the inverse of the daily performance of the S&P SmallCap 600 Index (SML[20]). This is a speculative, double-leveraged ETF that is primarily suited to day trading, but could be good for a three- to four-week trade now.

In the past couple of weeks, mutual fund managers have appeared to be locking in their gains (and bonuses) by selling the lower quality or highly volatile stocks in favor of safer investments, so both mid- and small-cap stocks could be vulnerable to further pullbacks. This ETF could be a way to cash in on further pullbacks in those stocks.

But be sure to check for any special margin requirements and, recognizing the high risk of this trade, place a stop-loss order[21] at the time of execution. A break above $35 could result in a quick move to $45 to $50. Stops should be entered at $27.75.

Related Articles:

• Chart Your Way to a Lifetime of Profits[22]
• How to Profit From an Explosive Chart Formation[23]
• Using the Relative Strength Index to Sell at the Right Time[24]

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