BALTIMORE (Stockpickr) -- This market just doesn't want to stay down. After opening lower yesterday, all three big stock indices managed to push their way to higher ground by the time the closing bell rang. Yes, momentum is clearly on the side of buyers right now.
But this still isn't a "dartboard market." By that, I mean that you can't pick stocks by throwing a dart at a board full of tickers. That may work during truly frothy bull markets, but stock picking still matters in this market.
Case in point, two thirds of Dow Jones Industrial Average components are down year-to-date. And of those, half are down 5% or more since the calendar flipped over to January. They're not just underperforming; they're underperforming by a factor of ten. So, hold onto "toxic stocks" in this environment, and your performance is sure to suffer.
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And Dow components are the least of your worries. A handful of other names (even big ones) look even more toxic right now. Today, we'll take a technical look at the ones you should avoid.
The companies I'm talking about today aren't exactly junk. By that, I mean they're not next up in line at bankruptcy court. But that's frankly irrelevant; from a technical analysis standpoint, these toxic stocks are some of the worst positioned names out there right now. For that reason, fundamental investors need to decide how long they're willing to take the pain if they want to hold onto these firms in the weeks and months ahead. And for investors looking to buy one of these positions, it makes sense to wait for more favorable technical conditions (and a lower share price) before piling in.
For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.
So, without further ado, let's take a look at five "toxic stocks" you should be unloading.