Is It Time to Sell Stocks? Check These 3 Signals!!

Hey everyone, Boston here with VectorVest. Let me ask you something. Before you bought your last stock, did you already know what would make you sell it? Because one of the biggest frustrations that we see here at VectorVest isn't about finding what stock to buy, it's watching investors hold onto them long after they've stopped behaving the way that they should be. I actually think knowing when you'll get out is just as important as knowing when you'll get in. So, today I want to show you a simple visual process that I teach that can help you recognize when a stock maybe telling you that it's time to move on. One thing that I've noticed over the years is that in the investing world, they spend a lot of time talking about what to buy. You'll see or hear things like this is the next big opportunity and here's the stock everyone's watching and don't miss your chance. And there's nothing wrong with looking for good opportunities, but what almost nobody talks about is the other side of the trade. How do you know when it's time to let it go? At what point do you look at a stock and say, "This isn't doing what I expected anymore?" Because here's the thing, knowing when you're going to get out of a position is every bit as important as knowing when you're going to get into one and you could even argue that it's more important. Just think about it for a second. If you don't already know what would make you sell a stock, why are you buying it in the first place? It's kind of like taking a road trip, let's say from North Carolina all the way to California. Sure, you know you have to go west, that's the goal. Just like when you buy a stock, you want it to go up. But, you wouldn't just jump in the car and start driving. You'd get a map and figure out a route, plug it into the GPS, check the weather, make sure you've got enough gas, pack what you need, and get a plan going before you even leave the driveway. So, buying a stock really shouldn't be any different. Before you ever hit that buy button, you should already know what signs you're going to watch for. What would tell you that the trade's still on track? And what would tell you that it's time to change course or get out all together? Now, there are a lot of different ways that investors answer that question. Some people like to use trailing stops, some like to use percentage stops, ratchet stops, or they've created their own set of rules that they've developed over the years. Today's video is not deciding which method is best. Instead, I want to show you one of the simplest visual processes I know for investors who don't already have a process. I call it the three-strike rule. Now, this isn't the only way to manage a position, and it isn't meant to replace whatever process you already use if it's working for you. Some investors might decide that one strike is enough. Others may wait until there's two being met. And some may wait for all three before making a decision. The important part isn't the number of strikes. The important part is having a repeatable process instead of making decisions based on emotion. And speaking of emotion, yesterday I was watching one of Glenn's videos, and he kept on repeating a phrase that I really liked. He was saying, "Trade the chart, not your heart." >> You know what I've heard recently? Trade trade the chart, not your heart. And I think a lot of you get caught up in there in the stocks that you really like, and you trade with your heart and let them and leave the chart, and you don't look at the chart. You oh no, it's going to go up, and when it doesn't go up, you're beating yourselves up because you should have listened to the chart. >> That might be one of the best pieces of investing advice that I've heard in a long time because it's so easy to become emotionally attached to a stock. I think we've all done it at some point. Maybe we've owned it for a few years, or maybe it's made us a lot of money. Maybe we're hoping that it'll turn back around soon. But the market doesn't care about how we feel about our stocks. The chart simply tells a story of what the stock is actually doing. A graph is honestly the DNA to the stock. That's exactly what this framework is designed to help with instead of making decisions based on our hope and our emotions, we're simply looking for evidence. So, let's jump into VectorVest and I'll show you what I mean. We'll start on the watch list and remember, we're still sorted by our relative timing from the last video. This time we're in an ascending order, so the lower RT is brought to the top just to make it easier for our video. We're going to focus on the stocks with the lower RT ratings. RT, which stands for relative timing, is our short-term price trend. RT above one tells us the stock is in an uptrend, while RT below one tells us the stock is in a downtrend. So, there are stocks on this list where the RTs are above one, so they don't really need to be worried about right now. But there are quite a few stocks on our watch list with RTs below one and they should all be looked at, but we're just going to focus on the lowest four today. So, we're going to highlight and open up our graphs. And immediately, it's going to open up to our one-year stock chart. For strike one, we're going to take a look at our price. Now, you could have bought this at any time. You could have bought it over here, you could have bought it in the middle, at the tops. Depending on when you bought this can make a bit of a difference, but look at this stock. Immediately, I get stressed out looking at it. We're running down here at around a dollar 50 and it shoots all the way up to 450, then it comes back to $2, kind of goes to 250, all the way back to over $4, back down to $1.90. This is going everywhere with the price. Strike one is looking at the price. Is it going sideways? Is it very volatile? Is it causing you stress? If so, it's meeting strike one. Next, strike two is going to be the RT itself. When your RT falls below one, which is our golden line right here, once it drops below one, that's telling us that the trend has started to weaken. So, now we're simply looking at two easy pieces of evidence. We've got price behavior and we've got trend. Both pointing downwards. They're in the same direction. Finally, we come to strike three and that's when the stock becomes a sell recommendation. If you remember earlier in our series, we had talked about wanting stocks that had prices being higher than their stop s t o p price. I mentioned that once the stock falls below the stop price, it becomes a sell recommended stock. So, this is another piece of evidence helping us to confirm that our stock is no longer behaving in the way that we want it to. So, for Plug, this is meeting all three strikes right now. Let's take a look at our next stock. Next, we have SpaceX. So, this is less than a one-year graph cuz SpaceX has not been around quite as long, but let's start with our three strikes. So, as soon as it became public, it had a nice run up, but it's come down since then and it's been going sideways and ultimately still down. So, I would 100% say strike one is being met. Strike two, the RT, started strong, but it ultimately fell back down under one by June 22nd. So, that's telling us that we were starting our downtrend and here it goes, it continues to go down. And lastly, a sell recommendation. We got our first sell recommendation on June 23rd. At any point after that, this really isn't worth purchasing because it's meeting all three strikes. Next on our list is UFO. All right, let's take a look. So, we've got our price has been moving sideways for most of the year. It ran up, hit a high, and it's come back down. Same idea, the price isn't doing anything great since about midway through June. So, opinion-based, sure, but I would say strike one is being met. Strike two, the RT fell below one June 12th. So, not doing us any favors, is it? And then finally, if we waited, we would have hit our sell recommendation. If you've noticed this blue line going across the graph, that is our stop price. That's what we keep talking about. As soon as the candles close below that price, we are now in a sell recommendation. So, all three strikes are getting hit on UFO as well. Lastly, we have F cell. Again, depending on where you bought it, it's up to you if you still want to hold it. If you'd bought it between, let's say, February, March, around there, you would have had some nice runs up, but I personally would not have held it all the way through these downturns. This is too much stress for me looking at this. The stock's very volatile. It goes up, it goes down, it goes up, it goes down. To me, strike one is being met. Then we come down for strike two, and it looks like our RT hit on July 7th. We went RT below one, once again, our gold line. It did come back up, but ultimately it went back down after July 23rd. So, strike two is being met. But, guess what? Strike three has not hit yet. We don't have our sell recommendation. So, although it's not hit a sell recommendation, you wouldn't necessarily have to wait for all three strikes to be met in order to get out. You can still hold on to it, of course, but ultimately you need to have a stop in place somewhere. Now, does this mean that this is the only way to manage a position? Not at all. Some investors are comfortable acting after the first strike. Some like to use two of the strikes. Others like to use trailing stops, percentage stops, or completely different rules. The three strike rule isn't about finding the perfect exit strategy. It's simply a visual framework that helps you build a repeatable process because once you've got a process, you are no longer reacting emotionally and you're simply just following the evidence. Remember, successful investing isn't just about buying great stocks. It's about knowing how you're going to manage them once you actually own them. So, have a plan before you buy, stick to the plan and you'll be making decisions with a lot more confidence instead of relying on your emotion in the moment. Now, over the last few videos, we've talked about how to recognize a good market, how to evaluate your stocks in your watchlist, and today how to recognize when one of your stocks may no longer be helping your portfolio grow. But, once you decide it's time to move on from a stock, you've also created an opportunity. You've made room for something stronger to come in. So, in the next video, we're going to talk about one of my favorite parts of the process, how to actually find quality stocks to replace the ones that you've sold. Before then, I'd love to hear from you guys again. If you had to find one stock to add to your watchlist tomorrow, where would you start looking? Would you start with the news? Would you start with social media? A stock screener? Maybe a friend's recommendation? Leave your answer down below in the comments because in the next video, I'm going to show you exactly where I start my search and how VectorVest helps to remove all of the noise from finding your next opportunity. Now, if you're wanting to keep up with our series and you're ready to jump in, go ahead and use the link below in the description box to take a 30-day risk-free trial to VectorVest 7. So, that way in next week's video, you're ready to start finding new quality stocks with us. Thanks so much for watching and remember trade the chart not your heart. I'll see you guys in the next one. Bye for now. >> [music] [music] [music]