Reason2Sell

Getting The Most Out Of Your Trades

Mike Bellafiore

Pre-order at Amazon

Regret

• I sold too early

Move2Move or Trade2Hold?

• Determine what the trade is

• Then judge whether you sold too early

Develop Exit Rules

• You determine your exit rules

• From Your PlayBook

• If you don’t then don’t complain

No Regret

• If you follow your rules then the move after is of no matter

• If the stock trades higher, so what?

• Your job is to do the right thing!

• It’s not to take every penny from a move

One Good Exit Strategy

Most Common Reasons2SellHits your price target

Intraday uptrend broken

Breaking news in the stock

Market is at important technical resistance

Breakings news in the market

Unusual seller on the tape

Most Common Reasons2Sell

Clear buying pattern dissipatesTime clock goes off in your trading brainToo steepToo much of a PullbackTrading day ends

8/13/12

1. Hits Your Target

Have a target or set of targets before you enter a trade

Follow your plan and hit out when your target(s) are reached

Consolidation at the 43.00 level provides short entry with a 41.50 price target

Prices reaches 41.50 target, then pulls back into the Close

2. Intraday Uptrend Broken

Zoom out to the 5 minute or 15 minute chart after 10AM

If a series of higher lows is broken, hit out

GNC begins clear downtrend off the Open, and short opportunity is provided when a 38.45 buyer drops...

...after sharp down move, it fails to make a new low, providing a clear signal that the downtrend has ended

3. Breaking News In The Stock

If unexpected news suddenly comes out, hit out and re-evaluate

It could mean a huge fundamental change in the company

A held offer appears at 22.00 in JCP, providing a short entry opportunity...

...however, after breaking down through range, JCP CEO announces better than expected store sales for May, leading to a quick reversal

4. Market Is At Resistance

Most stocks follow the overall market

If the stock and the market are both nearing big resistance, higher probability of a reversal

SPY reaches technical resistance area that it has failed to hold above for the past several days...

Simultaneously, BAC reaches 7.70 resistance area…

…but sells off when the market fails at resistance

5. Breaking News In The Market

If a big event occurs and causes the market to move erratically, hit out and re-evaluate

Can be an economic number, Supreme Court decision, terrorist attack, etc.

On 8/1, CAT begins to form uptrend after 11:00, providing an opportunity to get long...

...at 14:00, FOMC announcement is released, and the statement is bearish for stocks, leading to an immediate selloff into into the Close

6. Unusual Seller

If the stock tries to get above a price several times and fails, hit out

If you notice a lot of selling at a level and the seller steps lower, hit out

FOSL begins clear uptrend in the morning, with several opportunities to get long...

...unusual seller appears at 69.50, a signal that longs should exit their position and re-evaluate

7. Buying Pattern Dissipates

If a stock is showing a distinct buying pattern, but it disappears, hit out

This can be a set of consistent pullbacks, a set of consolidation flags, etc.

After ranging off the Open, a massive buyer appeared on the tape at 49.54, driving the price of the stock up over .70c very quickly...

...once the buyer disappeared above 50.25, the buying pattern was clearly gone, and the stock pulled back to the original price

8. Time Clock

If after a specified amount of time the stock hasn’t done what you expected, hit out

Wait for the stock to give you more information before getting back in

FMCN was strong off the open due to strong earnings news from other Chinese stocks…

Seller appeared above 21.00, offering excellent short opportunity…

…however, was not able to move away from the price and stayed there for several hours – a signal to exit the position and re-evaluate

9. Too Steep

If a stock goes down or up too far and too fast, it will likely bounce right back

Take some off into the move and look for a place to re-enter

CVS drove higher off the Open the day after being sold off on earnings...

...however, a move of over 1 point in 30 minutes is quite steep for this stock, a signal that a pullback is likely to follow...

Too much of a Pullback

8/13/12

The Principles of Elite Performance

• Add nuance to your rules

• You are not good at exits YET

• Practice, rehearse, think, talk about them

• Training, coaching, and mentoring

• Purposeful practice!

Contact

• mbellafiore@smbcap.com

• @mikebellafiore