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TheStreet Open House

5 'Toxic Stocks' to Sell in 2014

Stocks in this article: REGNSTRESGRTDREV

Revlon


Last up is Revlon (REV), the small-cap cosmetics company. Revlon is a standout on our list of "toxic" names because it's actually still trending higher right now. But that uptrend is being overshadowed by a classic topping pattern that's been forming in shares in the long-term.

>>3 Stocks Breaking Out on Big Volume

REV is currently forming a head and shoulders top, a bearish reversal setup that indicates exhaustion among buyers. The setup 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 at $24 at the moment for REV. If this stock can't catch a bid at $24, it's time to be a seller.

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." That's good reason to keep an eye on Revlon in the market sessions ahead.

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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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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