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5 Toxic Stocks to Sell in May and Go Away

Stocks in this article: CCPCVESXLVOD

Vodafone

Last, but far from least, on our list of toxic stocks is Vodafone ( VOD), the international cellular phone carrier. VOD has been all over the place in 2013, working its way 17.7% higher on the year through a series of wild swings. More recently, VOD's price action has been a little clearer -- but it hasn't exactly been looking bullish.

>>3 Big Tech Stocks on Traders' Radars

A rounding top in shares of VOD points to a bigger drop if shares break down below $29. The pattern indicates a gradual shift in control from buyers to sellers. Whenever you're looking at any technical price pattern, it's critical to think in terms of those buyers and sellers. Triangles, double tops and other pattern names are a good quick way to explain what's going on in this stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.

That breakdown level at $29 is a price where there is an excess of demand of shares; in other words, it's a place where buyers are still been more eager to step in and buy shares at a lower price than sellers are to sell. That's what makes the breakdown below $29 so significant -- the move would indicate that sellers were finally strong enough to absorb all of the excess demand above that price level.

Momentum, measured by 14-day RSI, adds some extra confidence to the bearish nature of the rounding top in VOD's price. The RSI uptrend broke just as VOD's share price topped, and it's been trending lower ever since. Because momentum is a leading indicator of price, that ramps up the potential for a breakdown.

To see this week's trades in action, check out the Technical Setups for the Week portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

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Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji

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