Hi Marty, thank you very much for your excellent service.
I have the same problem (when to sell) that one of our community members asked you days ago.
The swing trade selling is more clear and straightforward. My questions are concerning long term holders.
"A few rules I have as a long-term investor: 1. we can never allow a win turn into a loss. 2. we always sell at a 5% loss as the stock is telling us we bought wrong. 3. I usually sell when a stock I own closes out a week below its 50sma on above average volume."
These are some real and some hypothetical examples (just educational purpose) based in your 1, 2 and 3 points:
1- I believe FB is a good holding in any portfolio and I would like to keep it long term in my portfolio. I bought it 4 days ago and is down now. I am allowing a win turning into a loss. I am not going to sell it. Right or wrong? (I know there are no absolutes in this "game')
2- I agreed with you regarding the 5 % rule. The problem here is that most of the people follow dollar cost average the buying of the long term holdings so sometimes it is difficult to track/implement the 5 % selling rule with those long term stocks.
3- Stock down to 50 SMA: That is a tough choice for me. Do I have to buy more AAPL today or do I have to sell it? In the past I bought more ZM when it traveled to 50 SMA ( bad choice, look where it is now). On the other hand, I have bought more AAPL in the 50 SMA before and it always went up. So, it is confusing.
Thanks again Marty, your service is really good. I have learned in the past month ( after subscribed) more than a year of studying by myself.
Thank you for your kind words, and the great questions. The selling of a stock can be more challenging than the buying. I will start with #1.
#1 - I bought FB too, and was up a little and now down a little. The stock has found support at its 50sma in the past. I will give it room to see if it finds support there again. If I get down 5% I will sell the stock, and buy it back if/when it bounces off its 50sma. We can see a clear uptrend in this stock and it is making higher lows. I believe the markets are going higher, and I doubt the markets go higher without FANG dragging them along.#2 If we are "long term investors" in a stock and down 5% then it means we bought wrong. Yes, you can "dollar cost average" buying on the way down. But, what if it keeps going down? Some companies go out of business, and we do not want to go there with them. Therefore, it really depends on the stock you own. If I buy a stock and it goes down 5% I then sell that stock. Using FB as an example, If I am down 5% then sell that stock. I can buy it back as it moves back up AFTER bouncing off a moving average. If you dollar cost average and it keeps going down then you are compounding losses. That may not make sense to some. But, I cannot accept a loss of more than 5%.
#3 AAPL was down 1.95% last week and closed 1.5% below its 50sma on a daily chart. But, it we refer to the weekly charts (as we always do when buying/selling) it looks like it is forming a "shelf" in tight trading the past two months. Once again, I am bullish and see the markets going much higher. I doubt it will do that without AAPL and/or FB.
AAPL is not ZM! Zoom Video is a great company but the stock got ahead of itself in 2020. It trades with a cohort of "stay at home" stocks. Right or wrong the institutions are buying/selling stocks as a cohort. ZM PTON TDOC ROKU PINS ETSY and others seem to be in "stay at home" stocks that advanced rapidly in 2020 and now must prove themselves as they grow into their valuations.
I hope this answers your questions.
Have a great day!
Yes, very pleased with your ample response. Please keep your excellent work. Thanks! Blessings!