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TheStreet Open House

Toxic Stocks: 5 Charts to Sell

Bank of America

Buying Bank of America (BAC) six months ago would have been a really good move. Shares of the big bank are up more than 14% over that time, stomping the S&P 500's performance over the same time period. But they're looking a whole lot less good now. In the last week, BofA has gone from being solidly in "uptrend" mode to teetering on the edge. Here's how to trade it.

Bank of America is currently forming a very well defined descending triangle pattern, a price setup that's formed by downtrending resistance above shares and horizontal support to the downside at $16. Basically, as shares bounce in between those two levels, they're getting squeezed closer and closer to a breakdown below $16. When that happens, we've got our sell (or short) signal.

It's no coincidence that a breakdown below $16 also means a break in the uptrend that's been in force in BAC since last summer. I'd recommend staying away from the long side of this big bank until it exits the triangle -- one way or another.

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