When to Be Patient and Hold a Stock

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When to Be Patient and Hold a Stock

1. After a new purchase, draw a red defensive sell line on a daily or weekly graph at the precise price level where you will sell and cut When to Sell and Take Your Profit 107 your loss. In the first 1 /£ to 2 years of a new bull market, you may want to give stocks this much room on the downside and hold until the price touches the sell line before taking defensive action.

The defensive, loss-cutting sell line may in some instances be raised but kept below the low of the first normal correction after your initial purchase. If you raise your sell point, don't move it up too close to the current price, because any normal little weakness will shake you out of your stock. If your stock increases 15% or more after a correct purchase, move the defensive sell line up to less than 5% below the pivot
purchase price.

I do not think you should continue to follow a stock up by raising stop-loss orders because you will be forced out near the low of an inevitable, natural correction. Once your stock is 15% above your purchase price, you can begin to concentrate on the definite price where you will sell on the way up to nail down your short-term profit.

2. Your objective is to buy the best stock with the best earnings at exactly the right time and have the patience to hold it until you have been proven right or wrong. You should give securities 13 weeks after your first purchase week before you conclude that a stock that hasn't moved is a dull, faulty selection. This, of course, applies only
if the stock did not reach your defensive sell price first.

3. Always pay attention to the general market. If you initiate new purchases when the market averages are topping and beginning to reverse direction, you will likely have trouble holding the stocks bought. (Most breakouts will fail.)

5. Major advances require time to complete. Don't take profits during the first eight weeks of a move unless the stock gets into serious trouble or is having a two- or three-week "climax" rapid runup on a stock split. Stocks that show a 20% profit in less than eight weeks should be held through the eight weeks unless they are of poor quality without institutional sponsorship or strong group action. In certain cases, dramatic stocks advancing 20% or more in only four or five weeks are the most powerful stocks of all, capable of increases of 100%, 200%, or more. You can try for long-term moves in many of them, once your account shows a good profit and you are ahead for
the year.

5. If you own a dynamic leader or a stock belonging to a leading group, you may want to hold it at least until its weekly close is below its 10- week moving-average price line on increased volume. Some outstanding leaders go an amazing distance before this occurs.

6. If possible, try to hold through the stock's first short-term correction once you already have a profit. 8. Holding for a long-term gain during the early stage of a new bull market, in many cases, may force you to stick to your position long enough to make a big gain. Remember, the object is not to be right, but to make big money when you are right.