6 Stocks to Sell in December

Sell Into the Santa Rally

U.S. stocks moved up late last month on expectations of a solid European plan that would provide for both stability and growth. But the blast-off could fizzle out since there is considerable political and technical resistance to overcome. The U.S. economy is making slow progress, and recent unemployment numbers are misleading because so many workers have fallen from the workforce.

As for the major stock indices, all show that stocks are entering an area of heavy resistance. Will a Santa Rally occur? Perhaps, but we may have already seen it since stocks have rallied more than 9% since Nov. 25. Sellers should use the rally as an opportunity to raise cash and dispose of non-performers.

Here is our list of stocks to sell in December:

    Stock to Sell #1 – Chemed Corp. (CHE)

Chemed Corp. (NYSE:CHE) is a diversified health care facilities company that operates through two subsidiaries, VITAS Healthcare and Roto-Rooter Group. Although it beat Q3 estimates by 9.09%, the stock has not been able to break from its long-term bear market. And last week, two law firms announced that an investigation into alleged Medicare and Medicaid fraud amounting to millions of dollars was filed against the company.

Technically the stock broke down from a consolidation at $52, and a rebound failed to close above its 50-day moving average — a negative sign. Note that the stochastic�s fast line (red) is turning lower — another negative. Sell CHE at market.

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    Stock to Sell #2 – Hecla Mining Co. (HL)

Hecla Mining Co. (NYSE:HL) engages in the discovery, acquisition, development, production and marketing of lead, zinc, silver and gold. Despite higher prices in most of its products, the company�s earnings have been inconsistent and operations have been recently marred by the fatal mine accident inIdaho in April.

Hecla reported Q3 earnings of 11 cents, missing the analysts� consensus by over 15%. The stock is in a pronounced bear market with resistance at $6.50. Sell HL at market.

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    Stock to Sell #3 – Medtronic (MDT)

Medtronic (NYSE:MDT), a leading maker of pacemakers, defibrillators and other medical devices, is under pressure because of a loss of market share in theUnited States. Gross margins are expected to narrow, and analysts have cut their annual target to $39. Last week, Wells Fargo analysts said Medicare audits for heart and orthopedic procedures are �onerous for hospitals and will likely reduce procedure volume.� This could have a direct impact on companies like Medtronic.

Technically the stock broke from an ascending triangle but reversed back into it on very heavy volume causing the stochastic to flash a sell signal. Even if the stock stabilizes, the 12-month future is bleak because of the heavy overhead of potential sellers starting at $37. Sell MDT at market.

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    Stock to Sell #4 – Patterson Companies (PDCO)

Patterson Companies (NASDAQ:PDCO), distributor of dental supplies inNorth America, is expected to have a decline in gross margins in FY 2012 following tepid Q2 results. And last week, a Barclays Capital analyst noted that its �near-total exposure to theU.S. [is] a detriment, withU.S. growth under some pricing pressure.�

The stock has been struggling since falling through its 200-day moving average in July. A rally in October failed to hold above the 200-day, and a rally last week ended with a sell signal from our internal Collins-Bollinger Reversal (CBR) indicator.

The 12-month consensus price target for PDCO is $31. Sell PDCO at market.

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    Stock to Sell #5 – Sasol Ltd. (SSL)

Sasol Ltd. (NYSE:SSL), a chemical and integrated energy company, mines coal in South Africa and natural gas in other African nations and Canada. The company also has assets inIran, and there is a possible risk that sanctions may be imposed on the company by theUnited States and the U.N.

Earnings have improved, but the stock is in a pronounced bear market with sellers on balance for over six months. Technically it is approaching a huge zone of potential overhead sellers. It is unlikely in the foreseeable future that SSL will break above its 200-day moving average at $50 and move significantly higher. Sell SSL at market.

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Stock to Sell #6 – Teradyne (TER)

The semiconductor group has been a leader this year, but Teradyne (NYSE:TER) has not participated and should be sold. One reason for its failure is that in September earnings were adjusted lower to $1.38 this year versus $1.73 last year. And on Oct. 31, Teradyne�s revenues disappointed analysts, and S&P dropped their 2011 estimate to $1.32 and predicts a decline to $1.26 in 2012.

Technically the stock reversed from its 200-day moving average and has made a series of lows. A failure to hold at the 50-day moving average would signal a test of the lows at $11. Sell TER at market.

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