Know when to sell

…I was asked an excellent question by a member on a free forum that I have associated with for several years:

How do I determine my sell points when I already own a stock that has made a profit?

This is an excellent question, if fact, it’s the toughest question that I face with every stock that I own that goes up.

If I own a stock and it immediately goes down, this is the easiest decision I must make – SELL and sell fast. I know how to cut my losses and have been doing it for years. Yes, it’s a blow to my self esteem but I always feel better when I see that particular stock several dollars lower a few weeks later. This is when I feel good about the insurance policy I have (sell rules) to protect my capital.

Take ELOS for example: I started to see this stock on my daily screens in mid October and listed a text case study about Syneron on 9/22/04.

I wanted to buy ELOS in the $15-$16 range but it did not dip back down and give me a solid entry point in this range. I knew the company financials looked great, the product was in demand and the stock was a recent IPO. I did buy ELOS in two separate orders that averaged out to $17 and change.

Recently I see ELOS advancing quickly but the volume the past 3 days has been weaker than previous days. I tightened my actual stop at 12% to the intraday high.
The intraday high was $31.67 which makes my stop at $27.85.
***This is only for protection and can change as the days wear on***

Now that the market has closed, I will review the stock in more detail tonight. I don’t see my self doing anything crazy. I will leave the 12% protection stop (from intraday high) and watch the action in the first hour tomorrow morning, after this point, I will decide if I need to sell any or all shares. If it hits the stop, so be it, I have made a considerable amount in a very brief period. If it doesn’t, I will loosen the protection stop back to 15% and reestablish my mental stop tomorrow night. This is the process every day!

Piranha