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Byline: JONAH KERI
One of the toughest tasks for an investor is buying a winning stock at the right time and holding it for big gains. It takes skill, patience and a steady hand to do it properly.
A triple-digit percentage winner can supercharge your portfolio, even make your year. That's why it's so important to recognize when a stock tops, and know when to sell.
If you see your stock hit its peak, then start to sell off, don't be greedy. Try to wait for it to bounce back to its high, and you might end up losing even more of your gains.
To properly diagnose the situation, first consider how your stock arrived at its summit and what happened immediately afterward.
If your stock breaks out of a base, marks strong gains in an orderly fashion, then pulls back calmly in sedate volume, that could mean it's simply forming a new, healthy base.
On the other hand, suppose your stock hits a new high in low volume. That suggests institutions aren't behind the gains. A resulting sharp drop in heavy volume may then signal the big guys' run for the exits.