5 Toxic Stocks That Are Poisoning Your Portfolio

Universal Stainless & Alloy Products

We're seeing the exact same setup in shares of Universal Stainless & Alloy Products (USAP), a small-cap metals firm. Like Foot Locker, USAP is being boxed in by a downtrending resistance level above shares and a horizontal support level to the downside. A breakdown below support -- currently at $32 -- is the sell signal for this stock.

Support has been "rough" in that shares have flirted with breaks of $32 several times in the last year without actually triggering the sell. That said, we've get to see an actual close below that price. That means that a close below $32 is the signal to unload shares.

With any technical pattern, it's critical to think in terms of buyers and sellers -- not just shapes. After all, triangles, head and shoulders patterns, and the like, are a good way of describing what's happening on a chart, but they're not the reason why it's tradable. Instead, that all comes down to the supply and demand caused by those buyers and sellers.

The horizontal support level at $32 is a place where a glut of buyers has been willing to step in and put a floor in the stock. A breakdown would mean that increasingly eager sellers have absorbed all of the excess demand of shares sitting at that level -- and without that floor in place, shares could fall much further than that.

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