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TheStreet Open House

5 Toxic Stocks You Should Sell

Stocks in this article: AAONEXPNEMMLMMON

Martin Marietta Materials

It's been a pretty lackluster year for shares of Martin Marietta Materials ( MLM). The $5 billion construction product maker is up a whopping 2.7% since the start of 2013, underperforming the broad market by a big margin. But that's not what makes MLM look toxic right now. Instead, there's a new technical setup weighing on shares this summer.

>>5 Short-Squeeze Stocks Ready to Pop

MLM is forming a head and shoulders top, a bearish reversal pattern that indicates exhaustion among buyers. The head and shoulders is formed by two swing highs that top out around the same level (the shoulders), separated by a bigger peak called the head; the sell signal comes on the breakdown below the pattern's "neckline" level, which is right above $95 at the moment. A sustained drop below that $95 level is the major sell signal for this stock.

MLM has been forming this setup in the long term, a fact that points to long-term trading implications when and if the setup triggers. If you decide to go short MLM on the breakdown, I'd recommend keeping a protective stop on the other side of the 50-day moving average.

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