It's the best of times and the worst of times for investors in 2017. In other words, we're in a Dickensian tale of two markets right now.
It's been easy to fixate on the positive lately. The big S&P 500 index hit new all-time highs last month, and it's been holding up just below those record levels without missing a beat. Meanwhile, a full third of the index's constituents are up 10% or more so far this year. That's a breakneck pace this early in the calendar year.
But, what many investors don't realize is that there's been a bearish flip side to those positive market stats.
For instance, while a big chunk of this market is "working" right now, an equally big chunk isn't. As I write, more than a third of the S&P's components are actually down since the start of the year. Of those, more than half are underperforming the big market average by 10% or worse.
The key to racking up some big gains in 2017 isn't in finding the very best stocks you should buy right now -- it's in avoiding the worst ones. So, today, we're taking a technical look at four stocks that could be ready to turn "toxic".
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.
Without further ado, let's take a look at four "toxic stocks" to sell and when to sell them.