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Friday, February 13, 2009


1. Buying right solves half of your selling problem. If you buy exactly at the right time off a proper base structure in the first place and do not chase or pyramid a stock when it is extended in price too far past a buy point, you will be in a position to sit through most. normal corrections in the price of your stock. Winning stocks seldom drop 8% below a correct pivot-point buying price.

2. Beware of the big-block selling you see on the ticker tape just after

you have bought a stock during a bull market. Avoid getting scared or shaken out in what may just be a normal pullback.

3. If after a stock's price is extended from a proper base, its price closes for a larger increase than on any previous up days, watch out! This move usually occurs at or very close to a stock's peak.

4. The ultimate top may occur on the heaviest volume day since the beginning of the advance.

5. Sell if a stock advance gets so active that it has a rapid price run up for two or three weeks (eight to twelve days). This is called climax (blow-off) top activity.

6. Sell if a stock runs up on a stock split for one or two weeks (usually + 25% or + 30% and, in a few rare instances, + 50%). If a stock's price is extended from its base and a stock split is announced, in many instances the stock should be sold.

7. Big investors must sell when they have buyers to absorb their stock; therefore, consider selling if a stock runs up and then good news or major publicity (a cover article in Business Week, for example) is released.

8. New highs on decreased or poor volume means there is temporarily no demand for the stock at that level and selling may soon overcome the stock.

9. After an advance, heavy volume without further upside price progress signals distribution.

10. Tops will show arrows pointing down on a stock's daily chart (closing at lows of the daily price range on several days—in other words, full retracement of a day's advance).

11. When it's exciting and obvious to everyone that a stock is going higher, sell, because it is too late! Jack Dreyfus said, "Sell when there is an overabundance of optimism. When everyone is bubbling optimism and running around trying to get everyone else to buy, they are fully invested. At this point, all they can do is talk. They can't push the market up anymore. It takes buying power to do that." Buy when you are scared to death and others are unsure. Wait until you are happy and tickled to death to sell.

12. If a stock that has been advancing rapidly is extended from its base and opens on a gap up in price, the advance is probably near its peak. A two-point gap in a stock's price would occur if it closed at its high of $50 for the day and the next morning opened at $52 and held above $52 during the day.

13. Sell if a stock's price breaks badly for several days and does not rally.

14. Consider selling if a stock takes off for a good advance over several weeks and then retraces all of that advance.

15. When quarterly earnings increases slow materially or earnings actually decline for two consecutive quarters, in most cases sell.

16. Consider selling if there is no confirming price strength by another important member of the same group.

17. Be careful of selling on bad news or rumors; they are usually of temporary influence. Rumors are sometimes started to catch the little fish off balance.

18. Try to avoid selling on shakeouts (below major price-support areas).

19. If you didn't sell early while the stock was still advancing, sell on the way down from the peak. After the first break, some stocks may once pull back up in price.

20. After a stock declines 8% or so from its peak, in some cases examination of the previous run up, the top, and the decline may help determine if the advance may be over or if a normal 8% to 12% correction is in progress. You may occasionally want to sell if a decline from peak exceeds 12% or 15%.

21. If a stock already has made an extended advance and suddenly makes its greatest one-day price drop since the beginning of the move, consider selling, but only if confirmed by other signals.

22. When you see initial heavy selling near the top, the next recovery will either follow through weaker in volume, show poor price recovery, or last a shorter number of days. Sell on the second or third day of poor rally; it will be the last good chance to sell before trend lines and support areas are broken.

23. Sell if a stock closes the end of the week below a major long-term uptrend line or breaks a key price-support area on overwhelming volume.

24. The number of down days in price versus up days in price will change after a stock starts down.

25. Wait for a second confirmation of major changes in the general market, and don't buy back stocks you sold just because they can be bought cheaper.

26. Learn from your past selling mistakes. Do your own post-analysis by plotting on charts your past buy-and-sell points.

27. Sell quickly before it becomes completely clear that a stock should be sold. Selling after a stock has broken an obvious support level could be a poor decision because the stock could pull back after touching off stop orders and attracting short sellers.

28. Always project the week you can expect capital-gains selling by those who bought in volume at the original breakout point from a base. (This applies only if current tax laws favor capital gains.)

29. In a few cases, you should sell if a stock hits its upper channel line. (Channel lines are drawn to connect the lows and connect the highs on a stock's price chart.) Stocks surging above their upper channel lines should normally be sold.

30. Sell when your stock makes a new high in price if it's off a third- or fourth-stage base. The third chance is seldom a charm in the market. It has become too obvious and almost everyone sees it.

31. Sell on new price highs off a wide-and-loose, erratic chart price formation.

32. 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 its 200-day moving average price line.

33. In some cases, sell if a stock breaks down on the largest weekly volume in its prior five years.

34. Some stocks can be sold when they are 70% to 100% above their 200-day moving average price line.

35. After a prolonged upswing, if a stock's 200-day moving average line of its price turns into a downtrend, consider selling the stock.

36. Poor relative price strength can be a reason for selling. Consider selling when a stock's relative strength on a scale from 1 to 99 drops below 70.