Page 1152 - How to Make Money in Stocks Trilogy

Selling Checklist 137

Here’s a basic guideline for how to handle a rising number of distribution
days:

# of
Distribution
Days Action
1 No special action needed
2 No special action needed
3 Start watching your stocks even more closely
4 Look for something to sell
5 or 6 Proactively take defensive action if your gains are threatened or you
have small losses

You can see from the table above that 1 or 2 distribution days is not a
cause for concern. But when you get a third day, take note. Make sure you’re
keeping a close eye on each of your stocks and following your selling game
plan. That way you’ll be ready to act decisively if we get even more distrib-
ution days.
When the distribution day count reaches 4, look for something to sell.
Selling pressure is on the rise, so it’s an opportunity to shed your weaker
holdings. Remember one of the 8 “secrets” of successful selling: Sell your
losing stocks first! Don’t make the mistake of selling your winners while
holding your laggards.
Why should you look to sell something when you have 4 distribution
days?
Because by the time the general market has 5 or 6 distribution days, many
leading stocks may have already taken a hit. So be proactive and reduce your
exposure by selling any stocks showing weakness. For example, a stock may
be dropping lower on increasingly heavy volume—a sign institutional
investors are selling.
See the next chart for an example of how you could have locked in your
gains using the Market Pulse and basic sell rules.