When To Sell That Stock
The Hardest Investment Decision You’ll Make

You track a company for a few months, study its charts and read up on company fundamentals before moving in to take a position – a confident position because you’ve performed due diligence and have the facts to back up your decision to buy. Not so when it comes time to sell. Now we’re making assumptions, speculating, taking money off the table or adding it at just the wrong time.

How often have you taken a position at $25, sold at $30 proudly pocketing a tidy profit, only to watch share price go to $50 over the next 12 months.
Happens all the time. Happens to the best of the best. Determining when to close a position is the hardest investment decision you’ll make – and
often, you’ll look back and sigh with regret that you didn’t stay the course. I remember Wendy’s at $4.50. Too bad I didn’t take that company for a
long-term ride. Unlike most small- and micro-cap investors, I take a buy-and-hold view of my portfolio picks. I don’t jump in and out. Some componants of the Confident Trader Portfolio have been in place for years, showing steady growth quarter after quarter. However, regular readers and trackers of the CT Portfolio have seen a number of positions closed this year, dropping the portfolio’s holdings from a high of 52 to a low of 13 earlier this year.

The current CT Portfolio holdings total 23 companies across a spectrum of industries and sectors. It’s never easy to tell when to sell. Oh, some traders create “systems” that set off buy and sell alarms but, frankly, these in-and-out players aren’t any more certain which way the market winds will blow than my Aunt Tillie. Often, these short-timers are driven not by technical analysis or a careful review of company fundamentals. They’re driven by
emotion. You’ve heard of momentum players, right? They tag along, ride a stock up with the rest of the herd and hope like the dickens that they can pick the top and sell for maximum gain.

News flash: You’ll never pick the top. You may get lucky and sell at the share price high, but it’s sheer luck. You didn’t pick it. (I know, inflates the ego a little, huh?) So, tip o’ the day: Don’t try to pick the top. Translation? Greed is NOT good and it’s tripped up some of the best in the business. You have to know when to hold ‘em and know when to fold ‘em. And that requires vigilance, the latest in company news and an understanding of how to turn market sentiment to your advantage in analyzing the right stock picks for your investment needs.

Stay Vigilant

Today, you can set up your actual portfolio on a number of web sites and track daily performance. The web has made it much easier to track your portfolio’s performance as a group (important) and what each, individual holding is contributing, if anything. These days, all markets are jittery. Blue chips, mid-, small- and micro-caps are all in negative territory YTD, but the swing between smallcaps and large-caps is almost 9% in favor of the small capitalized companies. That’s two-and-ahalf quarters of data and it indicates a clear investment trend. Money is moving out of large-caps and in to small-and micro-caps. I’ve also seen a great deal of speculative money going into specific industries based on other happenings around the world. For example, when oil peaked above $140 the barrel, speculative money moved into oil and gas juniors – companies that would benefit from higher oil prices.

Since oil prices peaked, we’ve seen a strong pullback with that commodity closing at just above $114 on the day of this writing. Why? Well, for one thing, according to the AAA, Americans drove four billion miles less this spring and summer – ever since it cost $100 to fill up the SUV. Demand is down. So where does that leave those speculators who jumped into the oil patch just a few months back? Chances are, unless their exploration company brings in a gusher or two in the next few months, these investors will lose. Hey, There’s A Google Alert In My Inbox The problem is that many investors believe that the way things are today is the way things will always be. If oil trades at $143 today, it will trade at that price or higher in the
weeks and months ahead. Those long in oil are hurting. That’s why vigilance is important. Track your holdings daily and keep abreast of the latest news.

Stay Current On Company News
This loathsome chore once required hours of searching in the library or even on the web. Small-caps are always putting out press releases but finding them, even with search engine power, was time consuming. News reports might appear in overseas news and not be reported stateside. Not good if you have a position in an oil junior drilling in Mongolia that just announced the state had doubled its tax on oil in the ground. That’s something
you’d want to know before the rest of the crowd. But, if you’re holding 20 or 30 small- and micro-caps, tracking this information could be
a full time job – unless you use Google Alerts, the greatest investment tool since the Ouija board.

First, open a Google account if you don’t have one already. It’s free. Once your account is active, click on the Create Alerts button on your gmail page. Type in the name of the company you’re holding. Also create an alert for the company name in quotes. So, for each company in your portfolio, create two alerts: XYZ Company and “XYZ Company.” Google does the rest. Each time Googlebots find your search alerts, you’re notified and with a single click, you can access the absolute latest news – news that other investors may not discover until they receive their quarterly statements.

Create two Google alerts for each company in your portfolio and have the latest company news delivered to your inbox as it happens. Then move
to adjust your positions as necessary. Track Company Charts Even if you’re a 110% fundamental investor, why ignore any information about your holdings. Charts provide another perspective – almost a 3-D perspective of company activities and prospects for the future.

What do you look for?
How close is the stock trading to its historical resistance level?
How has the share price trended over longer periods of time? Consider a three and five-year time horizon?
How has the stock been trending long term?
Are you seeing share price closing above or below daily averages?
Can you discern a pattern? Has the stock established a bottom – a support level, a price at which buyers move in again?
A stock trading near its support levels has upside potential and should be added to the watch list.
How’s the average daily volume?

Thinly traded companies move in share price more slowly and are sometimes sold at less than market by a few basis points. These buyers and sellers are called market makers and you pay a premium coming and going when selling or buying through a market maker.
What is the correlation between daily volume and share price? A stock that rises on heavy volume has market support – at least for the moment. Conversely, if share price increases on thin volume and sells off on heavy volume, there’s a lot of speculators in your trading arena.

Double bottoms. These W-shaped chart configurations indicate strong upside potential since buyers moved in quickly when the share price dropped, shoring up share price and perhaps moving it to new highs. Stocks that have broken out of their established trading range, either up or down. These are stocks on the move and stocks you want to track. Also, using the Google Alert system, you can keep up with the latest in company news, analysts’ reports and other happenings at a company you’re considering. Hey, bringing in a new CEO is something you want to know about before buying in. Go Google Alerts.

There are other signals, a misnomer if ever there was one. There aren’t any buy and sell signals unless they’re created by the trader herself. But there are indicators, some of which are listed above. It's a sure thing. Can't miss. Run for the nearest exit.

The point is this: don’t follow the herd. That’s why you make your own buy and sell decisions. That’s why you’re willing to conduct the research or pay someone to do it for you. (Life’s too short to read a prospectus after dinner.) And that’s why determining the right time to sell is such a difficult task. It’s so easy to miss all of the signs, and if you miss just one, you could find yourself selling at a loss more often than is necessary.

Watch that nest egg. No one will take better care of it than you.