Prime Selling Pointers by William O' Neil  

Posted by Book Eater in

Prime Selling Pointers:

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 in 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’ve bought a stock during a bull market. The selling might be emotional, uninformed, temporary, or not as large, relative to past volume, as it appears. The best of stocks can have sharp sell-offs for a few days or a week. You should never refer to a chart of the stock for overall perspective to 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 runup 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 to 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 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’re scared to death and others are unsure. Wait until you’re 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 runup, 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 up trend 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-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. Stocks surging above their 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.) 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 stocks 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.

When to be patient and hold a stock:

1.) After a new purchase, draw a red defensive sell line on a daily or weekly graph at the precise price level where you will sell and cut your loss. In the first 1 ½ to 2 years of a new bull market, you may want to give stocks this much room on the downside and hold until the price touches the sell line before taking defensive action. The defensive, loss-cutting sell line may in some instances be raised but kept below the low of the first normal correction after your initial purchase. If you raise your sell point, don’t move it up too close to the current price, because any normal little weakness will shake you out of your stock. If your stock increases 15% or more after a correct purchase, move the defensive sell line up to less than 5% below the pivot purchase price.

2.) Give securities 13 weeks after your first purchase week before you conclude that a stock that hasn’t moved is a dull, faulty selection.

3.) Any stock that rises close to 20% should never be allowed to drop back into the loss column.

4.) Pay attention to the general market. If you initiate new purchases when the market averages are topping and beginning to reverse direction, you will likely have trouble holding the stocks bought.

5.) Major advances require time to complete. Don’t take profits during the first 8 weeks of a move unless the stock gets into serious trouble or is having two or three week “climax” rapid runup on a stock split.

6.) If you own a dynamic leader or a stock belonging to a leading group, hold it at least until its weekly close is below its 10 week moving average price line on increased volume. Some outstanding leaders go an amazing distance before this occurs.

7.) If possible, try to hold through the stock’s first short-term correction once you already have a profit.

8.) Holding for a long-term gain during the early stage of a new bull market, may force you to stick to your position long enough to make a big gain. Object is not to be right, but to make big money when you’re right.

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