It's Time to Sell Wipro, TripAdvisor, 3 More Toxic Stocks
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Version 0 of 1. It's easy to get caught up with the Christmas spirit right now, especially as the Dow flirts with cracking the big, psychologically important 20,000 level. But not all of the stocks in your portfolio are set to leave gifts under your tree in the weeks ahead. Most investors probably don't realize it at this point, but 2016 hasn't been a layup in terms of investment performance. While the S&P 500 is up more than 13% on a total returns basis since the start of the calendar year, almost one-in-three S&P components are actually down over that timeframe. That's some pretty toxic underperformance from some of the biggest stocks on the market. And, in some cases, it's just the start. As I write, a handful of big stocks are showing cracks. Even if the broad market averages keep on chugging higher in 2017, owning these laggards could be hazardous to your portfolio's health. To figure out which stocks to avoid, we're turning to the charts for a technical look at five stocks that are likely to underperform near-term as we turn the corner to 2017. 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 -- and when to sell them. Wipro Up first on the list of potentially toxic trades is $17 billion IT service provider Wipro (WIT) . Wipro has been a hard stock to like all year long, shedding more than 17% of its market value since the start of 2016. That's nearly 30% underperformance versus the S&P 500 for anybody keeping score. The bad news is that shares could have even lower to go from here. Wipro is currently forming a descending triangle pattern, a bearish continuation setup that's formed by horizontal support down below shares at $9.25, and downtrending resistance to the upside. Basically, as Wipro pinballs in between those two price levels, shares have been getting squeezed closer and closer to a breakdown through that $9.25 price floor. When that happens, we've got a sell signal. Relative strength, which measures Wipro's performance versus the rest of the broad market, has been an extra piece of evidence against this stock in recent months. Not surprisingly, WIT's relative strength line has been in a downtrend of its own for most of 2016, making this stock statistically likely to underperform the S&P going forward. If WIT slides below $9.25, we've got a new sell signal in this stock. |