Use 50-Day Average As Late Sell Indicator.(A)(INVESTOR'S CORNER)

Byline: Monika Tjia

At the top of its run, a good stock often shows one or more signs of breaking down. But what should you do if you miss the first sell signals?

Keep your eye on the stock's 50-day moving average, a key gauge of a stock's price trend. If your stock crashes below it and can't recover, consider taking profits.

A 50-day moving average calculates the average closing price over the past 50 trading sessions. Plotted on a chart, it smoothes out its day-to-day price fluctuations.

A moving average displays a stock's longer-term price trend, so its timeliness as a selling indicator lags those related to a stock's daily price and volume behavior. Consider up-to-date action such as climax runs (June 15 Corner), new highs on low volume (June 18) and late-stage base breakouts (June 27) as primary sell rules. Think of a stock's 50-day as the final warning sign.

Generally avoid selling your stock right at its 50-day. Healthy stocks will often find support or trail below the line for a couple of days, then climb again. In fact, in a good market, that's a good place to buy a smaller number of extra shares and pyramid up in a winning stock.

Mutual funds and institutions use a stock's 50-day moving average to add to their positions. By buying more shares when a stock eases back to its 50-day, long-term players keep their average cost down.