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When to Sell

A few (technical) reasons to sell:

  1. Largest daily price run-up.

  • Sell if an extended stock has its biggest gain since the move started.

  • Being "extended" means it’s far above the buy point from a solid base.

  • This usually occurs very close to a (temporary) top.

  1. Heaviest daily volume.

  • Sell on the heaviest volume day if the stock is extended.

  • The ultimate top often happens on the highest volume day.

  • Heavy volume means lots of institutional money is getting out.

  1. Exhaustion gap.

  • Sell if an extended stock gaps up.

  • If a stock suddenly jumps or gap ups dramatically, it might mean the run is almost over.

  • This is called an "exhaustion gap," and it often signals the top of the stock's move.

  1. Climax top.

  • Sell if a stock’s advance gets super extended with the biggest weekly price gain.

  • This is called a „climax top”.

  • This shows the stock is moving too fast and might be close to its top.

  1. Signs of distribution.

  • Sell when there’s a high daily volume with no price movement.

  • Sometimes, the stock moves a lot one week but doesn’t go higher, with lots of trading. This is called "railroad tracks" because the volume chart looks like two parallel lines.

  • It’s a sign of distribution because institutions are starting to sell.

  1. Stock splits.

  • Sell if a stock runs up 25%, 50%, or even 100% after a stock split.

  • Watch out if a stock’s price is greatly extended and they announce a stock split.

  • Stocks tend to top around excessive stock splits.

  1. Consecutive down days.

  • Sell if a stock has more down days than up days consistently.

  • You might see four or five down days, then two or three up days.

  • This means more stock is being sold than bought.

  1. Upper channel line.

  • Sell if a stock goes through its upper channel line after a huge run-up.

  • Channel lines are upward lines that connect the recent lows and highs.

  • A move above their upper channel line often marks the top.

  1. 200-day moving average.

  • Sell stocks that are 70% to 100% or more above their 200-day moving average.

  • This one is rarely used.

  1. Selling on the way down.

  • Sell on the way down from the top, IF you didn’t sell while the stock was going up.

  • After the first drop, some stocks bounce back once but won't get back to the last high.

  • If you didn’t sell early, you have to sell late.