Tools: When to sell?

[chrisd77]

I've been trading Netflix (NFLX) and although it's not a Rule 1 company I've made some pretty good returns off of it (35% YTD). I follow the tools that Phil outlines in the book and they've been very good to me. Especially on buying.

My question is on selling. From what I've observed if you follow Phils rule on the 3 tools and watching them pass what he explains, it seems to me that you could be giving up a lot of gains. My theory on this is to watch the Slow Stochastic as it seems to indicate when things are about to change. Are there other indicators that you watch to get out?

Thoughts on this and any advice?

[zyzzyva57]

Mr. Townsend describes in Chapter 12 of Rule # 1 how to set up your Slow Stoch with other metrics to monitor volume with one chart

Volume + excellent finances (he describes in other chapters of the book) says about all there is to know

Pretty much everything else with the stock market is noise and chatter, I am learning at Hard Knock U

[Gunnski]

Please remember these indicators all tend to lag. They do work well together. (Take a recent look at CTSH's chart! Out w/tools on 11-5-07. Tools saved my bacon.

For your sell signals consider Stoch. (14,5), MACD (8,17,9) and a MA(10). This is for selling, when each indicator shows a downward crossover. This may take place over a period of a couple of days or more.

I use the same for buys, but a MA(30) and upward crossovers.

I would suggest reading the charts and determining areas of Support and Resistance. This will be more timely and relieable. Use those trend lines!

It is silly but, the trend is your friend. No sense swimming upstream, when you do not need to.

Good investing.

[chrisd77]

Gun,

I was hoping you'd chime in as you've been very helpful in the past.

When you say "shows a downward crossover". Are you waiting for the crossover or just looking for that sign of downward momentum? If looking for the crossover, I could see where you could leave quite a bit of money on the table (as I would have in my Netflix example. got out with 16% rather than 24%).

I do need to look at charts a bit more and see what exactly they are telling me. Any recommended reading?

Thanks,
Chris

Originally Posted by Gunnski

Please remember these indicators all tend to lag. They do work well together. (Take a recent look at CTSH's chart! Out w/tools on 11-5-07. Tools saved my bacon.

For your sell signals consider Stoch. (14,5), MACD (8,17,9) and a MA(10). This is for selling, when each indicator shows a downward crossover. This may take place over a period of a couple of days or more.

I use the same for buys, but a MA(30) and upward crossovers.

I would suggest reading the charts and determining areas of Support and Resistance. This will be more timely and relieable. Use those trend lines!

It is silly but, the trend is your friend. No sense swimming upstream, when you do not need to.

Good investing.

[Gunnski]

When the faster MA crosses downward through the slower MA. Or when the price line or candle crosses below the MA(10) when using as a sell signal.

If you want some very good examples. Try stockcharts.com,. Click on there charting school. Take a look at MACD, Stochastics & Moving Averges.
Take a look at a Yahoo Finance or Stockcharts.com/(sharpcharts.com) chart for CTSH (11-5-07) is when the 3rd signal was fired. Use the set ups I have outlined above. You will see all (3) sell signals clearly, just prior to the big drop.
Best of investing!

[tombrown1]

Gunnski - you're right on with the trendlines and trending. I've never had any success with any iteration of Phil's tools, and I've recently been reading a ton of stuff on technical analysis and trading, and it all points to reading charts and identifying trends and trading with them.

[chrisd77]

Gun - Thanks for giving further information. I'll take a look this weekend and your suggestion.

[Gunnski]

TB,

That is why I have not been around much. I have really jumped into T.A. The three tools are a gauge now for me, the charts however do not lie! Trend lines, areas or resistence & support are key for me.

You must determine if there is a trend and trade/invest with it. It may be short term, mid-term or long term. Depends what type of investor you are.

This market is very choppy & I use a short term approach on my picks!

May all your trades get filled!

[chrisd77]

gun - I was looking at your CTSH example through scottrade. I see where the price on 11/5 moves through the 10MA. I also see that on the Slow Stochastic that the upper (Red) crosses over the blue (sorry I don't know the technical terms yet...EMA I believe!).

However on the MACD I'm a bit confused. As I read Rule 1 I thought we were to look at the histogram for a buy or sell sign. Given CTSH in that period the last time the histogram was above the "line" was way back on 10/10. So my question is why did you stay in when seeing this or have I been reading the MACD incorrectly?

I've got lots to learn, so I apologize for the questions. I still need to go through the stockcharts stuff (bookmarked a few minutes ago).

Chris

[Gunnski]

I do not use the Histogram. I use the Moving Average Lines.

If you use the crosshair line, the MA(10), Stoch. 14,5 and MACD 8,17,9 all line up perfectly, for a sell signal (10-5-07). I have this saved in my Scottrade chart setting as a sell set up chart.

More recently, take a look at CTSH. Stoch. went negative, on 12/27, then on 12/31, both MA(10) and MACD lined up, confirming the sell signal.

I suggest using the MA lines. The shorter MA will be quicker and will trigger when it crosses through the slower MA line, either up for buys or downward for sell signals.

Hope that helps. I can't stress how easy Stockcharts.com, make it in their Chart School. Hey its free education!