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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 Toxic Stocks You Need to Sell Now

AutoZone

First up is AutoZone (AZO), the $14 billion auto parts retailer. AutoZone has had a solid year in 2012, churning out gains of nearly 13% since the start of the year, but now shares are pointing lower.

Here's why this stock is toxic in September.

AutoZone is currently forming a descending triangle pattern, a setup that's formed by downtrending resistance and a horizontal support level below it. Essentially, as shares bounce in between those two price levels, they're getting squeezed closer and closer to a breakdown below that $355 support level. When that happens, traders have a short signal.

>>5 Rocket Stocks to Buy Into September

In real terms, the best way to think of thatsupport level is that it's a price below which there's a glut of demand for shares; eventually, that demand is going to get absorbed by the increasing selling pressure that's causing the downtrending resistance overhead. When that happens, and AZO can't catch a bid at $355, you don't want to be left holding the bag.

Momentum adds some confidence to the downside implications of this pattern: 14-day RSI has been trending lower since late February, when this stock turned over. Since momentum is a leading indicator of price, that's an added signal that AZO is headed lower.

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