Just about every investor has heard the old standby “sell in May and go away” around this time of year. This is more than just a fun play on words. It is rooted in the observed tendency for stocks to enjoy their strongest gains during the winter months and underperform during the summer.
It might be even more popular than usual this year, with stocks just off record highs and inflations sirens blaring. We’re not saying it’s time to cash out your portfolio, but our experts have drilled down to create a list of stocks to sell right now.
You see, Wall Street analysts call this the “seasonal cycle” in the stock market, and for decades going back to the 1950s, if not earlier, investors who stayed fully invested from November through April produced similar returns to being invested all year – but with less risk.
Summertime activity was lighter, and with many companies on easier works schedules, earnings blockbusters were less frequent. However, conditions changed after the financial crisis of 2008. Being out of the market over the summer meant losing out on a good deal of gains.
But this does not mean that all stocks are poised for summer gains. Even if “sell in May” isn’t the truism it used to be, there are some stocks you should still be selling right now.
While the market may not necessarily stall this year, one of our experts, Money Morning Quantitative Specialist Chris Johnson, has pinpointed five stocks that are actually in bearish cycles. If you have them, you might want to consider cashing out now before gravity takes over, dragging them lower.
The 5 Stocks to Sell Now
Baidu Inc. (NASDAQ: BIDU)
Often referred to as the Google of China, Baidu is a giant in Internet search and online marketing services.
Big Chinese tech stocks are in the crosshairs of the bears right now, and Baidu has been trending lower since February. In fact, it is now trading below its 50-day moving average and 41.5% off its peak.
Chris sees chart support at current levels, so any further weakness could kick off another round of selling.
Biogen Inc. (NASDAQ: BIIB)
Biogen is a biotech stock that hasn’t broken new ground in six years. Unless you are a short-term trader who like extreme volatility, this stock hasn’t been a winner for long-term holders.
Even behind the scenes, money has been flowing out from the stock for more than the past year.
That suggests the next move will be back to the bottom of its long-term trading range near $255 per share. That’s near correction territory yet again.
Citrix Systems Inc. (NASDAQ: CTXS)
This is a business software developer with products designed to facilitate virtual work and collaboration.
Shares shot higher as employees began to work from home during the pandemic last year. However, by July 2020, the novelty had worn off in such a competitive environment and the stock price fell from around $160 per share to about $114 by November.
They made a comeback by April 2021 and then collapsed before the month was over. Chris sees shares quickly dropping from their current $119 to $100.
It’s time to cut bait if you haven’t already.
Microchip Technology Inc. (NASDAQ: MCHP)
This semiconductor stock has been in a volatile range following a strong bull run.
Long-term momentum is waning as the short-term trend appears to be shifting in a bearish direction. Microchip has also been underperforming the semiconductor index (SOX) for several years, so the current weakness in technology stocks can be especially hard on Microchip.
Chris is looking for a drop to about $130 per share (from its recent $148) and suggests using in-the-money puts to take advantage.
JD.com Inc. (NASDAQ: JD)
JD is a China-based e-commerce company trading 28% off its February high following a strong 2020 performance.
Aside from geopolitical tensions, shares are now testing the critical $75 per share area and are below major moving averages. In fact, the 50-day average appears on track to cross below the 200-day average in what many chart watchers call a “death cross.”
All signs point to a downside target of $60 per share as the current bearish trend continues.
— Money Morning Staff
Source: Money Morning