Sell These 5 Stocks Now Before It’s Too Late (Thursday, Nov 3)

Photo Credit: Alan Klim

Each week Forcerank runs a variety of games covering different industries. What we have found, is that the lowest ranked companies in their respective games deliver the biggest negative price movement and vice versa for those in the top position. This week we look at a list of companies that are consistently at the bottom of their respective games. They include Intel (INTC) , Match Group (MTCH), Shake Shack (SHAK), Wells Fargo (WFC), and Nike (NKE).

Intel (INTC) | Semiconductors: Intel shares have edged down after the company gave slightly disappointing guidance, despite reporting an earnings beat earlier this earnings season. The chipmaker said it expects $15.7 billion in revenue for the fourth quarter against analyst’s forecast of $15.87 billion in revenue. Shares are now down 7% in the past month and are showing signs of recording further losses. It started with a bearish crossover in the MACD in early October that was aggravated by the third quarter report. Share prices are currently below the 20 and 50 day moving average as it approaches the longer term 200 day average. Its volume profile for the year indicates that the stock is more consistently priced near $32, about $3 below where its trading today.

Match Group (MTCH) | Social Media: All signs are pointing to a broader pullback from the dating consortium that has jumped over 40% in 2016. Fundamentally the company remains challenged given its weak revenue model. Many of the dating apps hosted by Match Group offer a free service that is enough to satisfy users. The company must expand its brand to support sustainable top and bottom line growth which decelerated in its third quarter report this week. In the day following the announcement the stock plunged nearly 15% and sent every technical indicator into a tailspin. The MACD already witnessed a bearish crossover to close October but continues to trend down while on balance volume takes a sharp turn down. Shares are currently trading at about $15.5 consistent with its 6 month volume profile. Forcerank users correctly ranked this stock poorly for multiple weeks with very little reason to abandon the pessimism in future games.

Shake Shack (SHAK) | Most Heavily Shorted: The burger chain has seen its shares of ups and downs, mostly downs, since its IPO in early 2015. Rapid store expansion across the world have brought down margins while sales struggle to establish a similar cult-like following outside of New York. Weak fundamentals have been supported by equally poor technicals in recent weeks. In early October the stock took a bearish turn after the 200 day moving average cross above the shorter 50 day average. On balance volume and MACD indicators have been in bearish territory for quite some time now and the combination of these dynamics point to more trouble ahead. Shake Shack reports earnings in the coming weeks and all signs (Fundamental, Technical and Forecrank) are pointing to a continued sell off.

Wells Fargo (WFC) | Banks: Wells Fargo’s name is becoming more synonymous with drama as the weeks progress. The bank is now a few months removed from the first reports of the fake account scandal that cost $185 million in fines and the resignation of its chairman and CEO, John Stumpf. An earnings beat shortly thereafter did little to reassure investors that this would be long forgotten by next quarter. Now earlier this week Wells Fargo agreed to pay $50 million to settle a lawsuit alleging the banks padded appraisal fees for homeowners. Since the start of October the bank has received a number of downgrades for its discretions and will continue to see problems until they stop deceiving customers.

Nike (NKE) | Apparel: Nike maintains its position toward the top of this week’s apparel contest but most signs point to sell. The average user ranking dropped significantly to 4.2 from 2.75 after a Bank of America analyst downgraded the stock to a underperform. Despite its size and clear market power Nike has started to feel its competitors breathing down its neck. Adidas is inching closer each and everyday while Under Armour and Lululemon have clearly made a splash. The biggest problem for the shoe brand are weaker margins and difficult growth comps resulting from competitive headwinds and heavy discounting. Nike no longer has the pricing power it once did and must resort to sales to keep inventory manageable. The selloff that ensued after the downgrade may have been overdone but it’s clear that the swoosh has some work to do before investors are confident about its prospects. A bearish crossover in the MACD to start the month and steadily declining volume both point to a downtick in coming weeks.