U.S. markets are clawing their way back to breakeven again this week. On a total returns basis, the big S&P 500 is only 4.5% lower than it started, less than half the red ink that the big index was showing just a few short weeks ago.
But that stat doesn't really tell the whole story for stocks right now.
While the broad market has been narrowing its losses this month, almost a third of S&P components are still down 10% or more since the start of January. That's a pretty huge chunk of the market that's down double-digits right now. Worse, plenty of stocks that have held up alright in 2016 are starting to show cracks at the exact same time that the S&P 500 has been righting itself.
Put simply, some stocks still look "toxic" right now -- and avoiding them could be the best thing you do for your portfolio this year…
To do that, we're turning to the charts for a technical look at five big-name stocks that could be turning toxic here. 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 entry and exit points.
Just so we're clear, the companies I'm talking about today are hardly junk. By that, I mean they're not next up in line at bankruptcy court – and many of them have very strong businesses. But that's frankly irrelevant to what happens to their stocks; 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.
So without further ado, let's take a look at five toxic stocks to sell.