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5 Toxic Stocks to Sell in November

Stocks in this article: ORCL KMPR VIV KMB PRGO

Telefonica Brasil SA

The exact same descending triangle setup is showing up in shares of Brazilian telecom giant Telefonica Brasil SA (VIV). Just like the setup in KMPR, VIV is showing a downtrending resistance level above shares and a horizontal support level below them, right at $21.40. The sell signal comes when that price level gets broken.

Whenever you're looking at a technical setup, it's worth thinking about it in real terms -- after all, "triangles" and other geometric shapes don't have some magical powers on a stock chart, they're just easy ways of describing what's going on. In Telefonica, horizontal support at $21.40 is a price below which there's historically been a glut of buying pressure. In other words, it's a price where buyers have been more eager to buy shares cheaply than sellers have been to sell them. But the downtrending resistance level above shares indicates that sellers do have some control of shares at higher prices that buyers aren't willing to shell out for (thus the lower highs).

A breakdown below $21.40 means that those sellers were able to absorb all the excess buying pressure that used to exist at $21.40. That's why it makes sense to be a seller on that move -- with a major price floor taken out, VIV has a high probability for more downside. Until that happens, selling looks premature.

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