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5 Toxic Tech Stocks to Sell or Avoid

Oracle

First up is Oracle (ORCL), the $150 billion enterprise software firm. In fairness, Oracle has been a high-performing name to-date in 2012, rallying more that 21.5% since the first trading day in January. But this stock has been looking more and more bearish as Mr. Market has corrected in the last month.

Now a technical price setup provides a more complete picture of what to do with ORCL shares.

>>10 Stock Picks of the Highest-Rated Money Mangers

That's because Oracle is forming a head and shoulders top right now. The head and shoulders is probably one of the most followed technical patterns out there. It's formed by three swing highs in a stock: two that top out at approximately the same level (the shoulders), separated by a middle peak that's higher than the others (the head). The neckline acts like a sort of "price floor" for the bottom of the pattern; when it's broken, investors have a sell signal.

Lest you think that the head and shoulders is too well known to be worth trading, the research suggests otherwise: a recent academic study conducted by the Federal Reserve Board of New York found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in "profits [that] would have been both statistically and economically significant."

Shareholders get a reprieve if ORCL exits this pattern to the upside.

For another take on Oracle, it shows up on lists of 3 Sleeping Giants Ready to Bounce Higher and 5 Stocks Pointing to the Right Place and the Right Time. I also featured it in "5 Stocks Seth Klarman Loves."

Stock quotes in this article: QCOM, HPW, CRM, ORCL, NOK 

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