The Charts Say to Stay Away
3 Breakout Stocks Under $5
It appears the ball is in the bulls’ court, and it could remain there for the rest of the year. But that doesn’t mean all stocks will benefit from this market strength.
A few charts are flashing very clear warning signs that indicate they will not participate in the rally. And if the market reverses before the new year, these names are likely to fall faster than the rest.
So, according to the charts, you should sell these stocks and put your money to better use.
Stock to Sell – Buffalo Wild Wings (BWLD)
Restaurant franchiser Buffalo Wild Wings (NASDAQ: BWLD) ran from under $38 to over $50 in the past four months. This caused the stock’s price/earnings (P/E) ratio to rise above 23, which is higher than average for its sector.
Technically, the stock’s chart is showing a pyramid formation, a variation of a head-and-shoulders chart pattern, which is telling us it’s time to take profits in BWLD.
Stock to Sell – Eastman Kodak (EK)
Eastman Kodak Company (NYSE: EK) has suffered a series of losing quarters, and even though this former household name has showed some earnings improvement, the stock is struggling. The company’s revenues are down again versus last year, and profit margins are much lower than its peers.
Sell EK and put the money to work in a better performer.
Stock to Sell – ITT Educational Services (ESI)
ITT Educational Services, Inc. (NYSE: ESI), a provider of postsecondary degree programs, is under investigation for “potential concerns for breaches of financial fiduciary duties by the board of directors and other company executives.” And the U.S. Department of Education’s crackdown on student loan defaults and ESI’s less-than-stellar repayment rate do not paint the prettiest of fundamental pictures.
Technically, the stock has broken down from a descending triangle and has beenin a bear market since late spring, and on that basis alone should be sold.
Stock to Sell – Nationwide Health Properties (NHP)
Real estate investment trust (REIT) Nationwide Health Properties Inc. (NYSE: NHP) invests primarily in senior housing, long-term care properties and medical office buildings. Even though NHP seems to be in a position to benefit from the growing market for senior care, it has embarked on an expansion program that will increase its debt. Compared to other health care REITs, S&P notes NHP’s higher-than-average price/earnings ratio.
Technically, the stock has fallen through both its bullish support line and the 200-day moving average.
Stock to Sell – Quanex Building Products Corp. (NX)
Quanex Building Products Corporation (NYSE: NX), which provides engineered products and aluminum sheet products, just had its earnings estimates for Q4 reduced by analysts. Ameritrade’s Research Team tool changed its recommendation from “hold” to “downgraded.”
On the chart, NX has broken with prices falling through its 200-day moving average from a huge double-top. A breakdown from the current level could take NX to $13.
Stock to Sell – Market Vectors High-Yield Muni Index ETF (HYD)
Fed policy is currently geared to encourage equities at the expense of bonds, so interest rates are almost certain to rise and long-term bonds fall. Municipal bonds may be in a difficult position, as well, since the White House-appointed deficit-reduction commission recently called for an end to tax-free status for new municipal bonds.
ETFs like the Market Vectors High-Yield Municipal Index ETF (NYSE: HYD) have fallen as a result of current market conditions and are likely to continue to do so. Get out now.
