Page 394 - How to Make Money in Stocks Trilogy

When to Sell and Take Your Worthwhile Profits 269

6. Poor relative strength. Poor relative price strength can be another
reason for selling. Consider selling when a stock’s IBD’s Relative Price
Strength Rating drops below 70.
7. Lone Ranger. Consider selling if there is no confirming price strength
by any other important member of the same industry group.

Breaking Support
Breaking support occurs when stocks close for the week below established
major trend lines.
1. Long-term uptrend line is broken. Sell if a stock closes at the end of
the week below a major long-term uptrend line or breaks a key price
support area on overwhelming volume. An uptrend line should connect
at least three intraday or intraweek price lows occurring over a number
of months. Trend lines drawn over too short a time period aren’t valid.
2. Greatest one-day price drop. If a stock has already made an extended
advance and suddenly makes its greatest one-day price drop since the
beginning of the move, consider selling if the move is confirmed by other
signals.
3. Falling price on heavy weekly volume. In some cases, sell if a stock
breaks down on the largest weekly volume in its prior several years.
4. 200-day moving average line turns down. After a prolonged
upswing, if a stock’s 200-day moving average price line turns down, con-
sider selling the stock. Also, sell on new highs if a stock has a weak base
with much of the price work in the lower half of the base or below the
200-day moving average price line.
5. Living below the 10-week moving average. Consider selling if a
stock has a long advance, then closes below its 10-week moving average
and lives below that average for eight or nine consecutive weeks, unable
to rally and close the week above the line.

Other Prime Selling Pointers

1. If you cut all your losses at 7% or 8%, take a few profits when you’re up
20%, 25%, or 30%. Compounding three gains like this could give you an
overall gain of 100% or more. However, don’t sell and take a 25% or 30%
gain in any market leader with institutional support that’s run up 20% in
only one, two, or three weeks from the pivot buy point on a proper base.
Those could be your big leaders and should be held for a potentially
greater profit.