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TheStreet Open House

5 Toxic Stocks You Should Sell

Eagle Materials

We're seeing the exact same pattern in shares of Eagle Materials (EXP), a $3 billion cement stock. This trade is just a little further along. That's not too surprising -- MLM and Eagle operate in the same business, so they're likely to correlate highly with one another. But whatever the reason, EXP is providing us with another long-term sell signal this summer.

>>5 Rocket Stocks to Buy Now

For EXP, the neckline level is right above $65 right now, a price that shares pushed below at the end of last week. Today, we're seeing confirmation that EXP buyers couldn't hold shares up above that last-resort support level at $65. That makes EXP a sell right now. Momentum adds some extra evidence to Eagle's downside bias -- RSI has been in a long-term downtrend since before the head and shoulders started forming.

Lest you think that the head and shoulders is too well known to be worth trading, the research suggests otherwise. A recent academic study conducted by the Federal Reserve Board of New York found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in profits that "would have been both statistically and economically significant." If you decide to bet against Eagle, keep a tight stop in place.

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