When to sell shares - 7 tips

Every individual circumstances is different. This is just a very general tips about when to sell shares.

i) Price below (30-40day) Moving Average
ii) Technical metric is below level
iii) Recommendation (from various sources) is SELL
iv) Price below trend line
v) Never give back more than half your profit
vi) Never ignore Confirm Down signal
x) sell share outright

Technical Analysis - MCP - McPherson's Limited

McPherson (MCP) is a company involved in marketing of household consumer products, and book and commercial printing. This will be all that is going to be said in terms of fundamentals of this company. The following will be strictly a technical analysis using methods from McNeil's book How to make money in Stocks and Weinstein's book Secret for Profiting in Bull and Bear Markets.

The two graphs presented here are the 2 year daily graph and the 5 year weekly graph. The black line is the closing price. The red lines are the 20 point moving averages. The Green line is the Stopping criteria from VectorVest.

Looking at the 2 year daily graph, the current price is almost back up the top level from around 1 year ago. This is potentially a set of the cup and handle pattern mentioned by McNeil
(http://ozstock.blogspot.com/2010/12/canslim-method-william-oneil.html). Once this signal breaks strongly, it will be a good signal to buy. Also the buy should only happen when the price still keep above the moving average.

From Weinstein's method
(http://ozstock.blogspot.com/2011/01/stan-weinsteins-secrets-for-profiting.html), the top from almost 1 year ago seem that it may be the end of Stage 2 and going on Stage 3 as the increase in price levels out. However a Stage 4 which is going downwards phase, did not develop, but instead it went sideways for almost 1 year and now it may be ready for a cup and handle.

Looking now at the 5 year weekly graph, we see that the current high price and the top of 1 year ago is only slightly lower that the pre-GFC top. One interesting feature from this 5 year graph is that the crash of MCP due to the GFC can be anticipated. The red moving average line is a good indicator since the pre-GFC peak, MCP then drifter slowly below the red line and even form lower top a few times below the red line. This is the point to sell. Only after this, then MCP dropped dramatically. So those who watched the red moving average should have got out before the steep crash.

Stan Weinstein's Secrets For Profiting in Bull and Bear Markets

Continuing the series of summaries of investment strategy book's, here is the acclaimed book by Stan Weinstein on Secrets for Profiting in Bull and Bear Markets. It is presented in point forms so that it is quick and easy to read. 

The points includes when not to buy stock, how not to sell stocks, how to sell stocks profitably, when not to short sell stocks and when to short. In addition, Weinstein has identified the pattern on how stocks rise up and decline in FOUR stages.

Don't buy

- overall market is bearish

- stock in negative group

- stock below its 30 week MA

- its 30 week MA is decreasing

- stock has already advanced a lot

- if stock has poor volume characteristic on breakout

- stock has poor relative strength

- stock has nearby overhead resistance

- by guessing a bottom

Don't sell (stock you already have):

- sell based on tax considerations

- sell based on dividend yield

- sell based on PE or because PE is too high

- average losses by buying more stock that is going down.

- wait of the next rally to sell

- refuse to sell because market is trending up

- keep holding stock because it is high quality

Selling stocks

- use stop losses - based on MA and previous support level

- don't use stop loss based on percentages

- First stop loss should be based only on the previous support

- Other stop losses adjusted based on MA

- Increase the stop losses to higher bottoms

- use stop loss at number slightly less than a round number.

don't short

- because of high PE

- because  price has rise too much

- because everyone thinks it's going to crash

- stock trades thinly

- a stage 2 stock

- stock that is in a strong group

- without protecting with a buy stop loss

- a stock that is above its Rising 30 week M.A.

- a stock with positive relative strength

Do short

- negative market

- negative group - group chart broken below 30 week MA, and declining relative strength.

- its stage 2 increase  was very strong, clearly above 30week MA

- Volume confirmation not necessary for shorts, since prices on the way down don't need strong volume

- Short when the price break down below a certain level. Place buy stops at the previous peak.

STAGES

1. Base phase - trending in range

2. Advancing phase- moving strongly upwards. 30 week MA also  starts increasing after breakout. BUY

3. The Top Area - 30week MA starts to level off. Place sell stop below this range.

4. Declining phase - don't need strong volume to confirm this phase. SELL

RELATIVE Strength = Price of Stock / Price of Market Average