Page 1243 - How to Make Money in Stocks Trilogy

Don’t Invest Blindly: Use Charts to See the Best Time to Buy and Sell 225

Using Charts to Go Through the Checklists

Selling Checklist

❏ Chart Analysis: Consider selling some or all of your shares if you see these signals:
➔ Biggest single-day price decline since start of stock’s run on heaviest volume in
months
➔ Sharp drop below 50-day moving average line on heaviest volume in months
➔ Sharp drop—and close—below 10-week moving average line on heavy volume

We’ve already covered the basic selling game plan:

• Take most profits at 20%–25%.
• Cut all losses at no more than 7%–8%.
• Take defensive action as a market downtrend begins.

That’s a simple and effective way to nail down some good profits and
avoid any serious losses.
And now that you’ve added charts to your investing toolbox, you can tap
into additional ways to spot early warning signs in your stocks—signs that
someone who does not use charts simply cannot see. Over time, it will
become increasingly clear what a huge, money-making advantage that gives
you.
As you become more comfortable with charts, you’ll discover other tech-
niques that help you move to the sidelines and safeguard your profits. But to
get started, let’s take a look at 3 common signs of trouble.

■ ✔ Biggest single-day price decline since start of stock’s run on

heaviest volume in months

Let’s see: A huge decline on the heaviest volume in months . . .
There’s no mystery to that “story.” Institutional investors are aggressively
dumping shares!
Some fund managers may be liquidating their positions, and that spells
serious trouble for the stock—and for you if you continue to hold.