Is It Time to Sell These Portfolio Fund Losers?

Twitter Inc (NYSE:TWTR), Micron Technology, Inc. (NASDAQ:MU), and Chesapeake Energy Corporation (NYSE:CHK) could see additional near-term technical struggles

Sep 16, 2015 at 12:11 PM
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Over the next several weeks, Wall Street will become privy to the stock holdings that mutual funds and other institutions have been holding in the third quarter. As Schaeffer's Senior Quantitative Analyst Rocky White recently noted, a number of these firms will try and juice their portfolios at the end of the quarter in what is known as "window dressing." Simply stated, they'll either add outperforming equities or drop underperforming names to make their returns look more appealing. Three names these portfolio managers could be looking to sell in the near term given their dismal technical performance are microblogger Twitter Inc (NYSE:TWTR), semiconductor concern Micron Technology, Inc. (NASDAQ:MU), and oil-and-gas issue Chesapeake Energy Corporation (NYSE:CHK).

TWTR's fall from grace has been fodder for the Street for some time now. Year-over-year, the shares have surrendered more than 46%, and 42% over the past six months. More recently, the stock bottomed at a record low of $21.01 in late August, but was last seen lingering near $27.16, after news of a fresh user-building strategy.

From a contrarian perspective, Twitter Inc's struggles could be far from over. Of the 23 analysts covering the shares, 11 maintain a "strong buy" recommendation, with not a single "sell" to be found. Although some analysts have started to re-evaluate their upbeat ratings, there's still plenty of room for downgrades to pressure the shares lower. 

It's been a devastating year for MU, down 53%. Over the past six months alone, the shares have shed 40%. What's more, the equity's recent M&A-related rally off its Aug. 24 two-year low of $13.50 was quickly contained by a number of overhead moving averages, including MU's 40- and 50-day trendlines. Today, the shares are hovering near breakeven at $16.52, after Raymond James followed in the footsteps of Nomura, and cut its price target on the stock to $28 from $38.

The stock could encounter additional headwinds, too, should option bulls jump ship. The equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 3.90 ranks in the 92nd annual percentile. Simply stated, Micron Technology, Inc. calls have been bought to open over puts at a near-annual-high clip in recent weeks.

The technical gods haven't been too kind to CHK, with the stock staring at a 58% year-to-date deficit, and a six-month decline of 41%. In fact, the shares are fresh off a 12-year low of $6.01, tagged on Aug. 25. Although the security is getting a boost today from crude oil's surge -- up 4.3% at $8.22 -- it is running out of steam near its 50-day moving average.

On the sentiment front, short sellers have been rolling the dice on more downside, and upped their bearish bets by 8.1% in the last two reporting periods. While short interest currently accounts for more than one-third of Chesapeake Energy Corporation's available float, there's still plenty of room for short sellers to increase their exposure. Should this happen, CHK could be faced with a round of selling pressure.

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