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TheStreet Open House

5 'Toxic Stocks' to Sell in 2013

NRG Energy

Despite what's been a good year for electricity generator NRG Energy (NRG), this stock is starting to look toppy.

Specifically, it's a double top pattern in shares of NRG that looks bearish. A double-top pattern is formed by two swing highs that come in at approximately the same price level. They're separated by a swing low that's the breakdown level for the pattern -- a move below that low triggers the sell signal in shares. For NRG, that sell signal comes on a move below $19.50.

It's important to remember that it doesn't matter why selling pressure is coming into NRG right now -- the two tops on this chart show us that it is. Now, it's just a question of whether that newly introduced selling pressure can overcome the holdout buyers sitting below $19.50. If they do (with a breakdown), then it's time to exit this stock -- or even bet against it. If you decide to take the short-side, I'd recommend keeping a protective stop on the other side of the 200-day moving average.

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