Sell These 5 Toxic Stocks Before the Next Drop

 

BALTIMORE (Stockpickr) -- The top talk is back this week, following another S&P 500 retreat from the 2,000 mark and a big black eye on the long-awaited Alibaba (BABA) IPO last week.

Must Read: Must-See Charts: 5 Big Stocks to Sidestep the Selloff

Are stocks putting in a top here? No, not likely.

Regardless, the past week's correction has still been a critical reminder that the individual names you own matter a whole lot -- particularly because the big indices, such as the S&P, have grossly understated just how hard some individual names have pulled back in September. For instance, social media stocks are off an average of 2.5% since the start of this month, and the energy sector is down more than 6%.

That could just be the start. Some specific stocks look ready for an even bigger drop in the sessions ahead. That's why, today, we're taking a closer look at five "toxic" names to avoid in September.

Buying big, "safe" blue chips doesn't make you immune from owning bad stocks. In fact, every single name on our list today is a large-cap stock that's worth more than $10 billion in market value. So this isn't just a list of stocks to avoid -- if you already own one of them, then it could be time to sell.

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.

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