BALTIMORE (Stockpickr) -- After a 15-month rally in the broad market, stock investors have a lot to lose right now. That's all the more reason why you should be looking out for "toxic stocks" in your portfolio.
Having just a few performance drags in your portfolio can be enough to decimate your returns in 2014. The fact that 17 of the 30 big, safe stocks in the Dow Jones Industrial Average are down since January does a perfect job of making the case for being selective in picking stocks. If you bought the five best Dow stocks in January, you'd be up 7.8% year-to-date; if you bought the worst five, you'd be down 8.4% over that same stretch. So yes, there's a lot of disparity between the best and worst performers right now.
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So which stocks are set to drag your portfolio the lowest in the next few months? Today, we're taking a technical look today at five toxic stocks you should start selling.
Just to be clear, 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, sellers are shoving around these toxic stocks 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.