Sell Decisions: CAN SLIM PLUSby

John Mackel, Esq.

Real Estate and Business AttorneyPasadena IBD Meetup Co-Leader

Oh, Good Grief! I bought it. Now what?

CAN SLIM PLUS CAN SLIM gets you into the right stocks at the right time. PLUS gets you out at the right time.

P – Protect Your Capital: Always sell before a 7-8% loss.L – Sell Laggards to Feed Leaders: Some positions will outperform, so sell down positions in laggards to feed the leaders.U – Up 20-25%; Consider Selling: Only exceptionally strong stocks should be held for potentially bigger gains.  S – Sell Signals: Watch for sell signals, especially after an extended run.

Protect Capital; Preservation Is KeyDefensive selling is critical.Sell decisions are based only on

technical action.Always sell before you have a 7-8%

loss. If freezing is a problem, selling part

(say 1/3) when down 3%, 1/3 when down 5% and the remainder when down 7% should help.

Seasoned traders develop an eye for selling earlier and the ability to buy back if they are wrong.

If you take a 20-25% gain, you can afford to take 2 or 3 7-8% losses and still make a profit or break even.

Avoid u-turns, sell before there is a loss.

Don’t Ignore a Problem

Sell Laggards & Feed LeadersSome sell their leaders too early instead

of selling laggards.Leaders are stocks that are up the

highest percentage.Early in a rally, it is often difficult to tell

which stocks will outperform. So, several initial positions may be entered.

As the rally progresses, focus on your best percentage performers and find places for follow-on purchases with money from the sale of laggards.

Consider Selling When Up 20-25%

Institutions often begin taking profits at this level causing a pullback.

It’s easier to sell on the way up because pullbacks can happen quickly.

Exceptions:The 8-Week Rule - Keep stocks for at

least 8 more weeks that make 20% or more within the first three weeks after breaking out.

Keep exceptionally strong stocks bought earlier in a bull market with excellent fundamentals for longer-term gains.

Sometimes, keep the early leaders in a rally until sell signals arise, but protect the 20-25% profit on pullbacks.

Sell Signals Save Suffering

What Are Sell Signals?A Climax RunA Close Below the 10-Week or 50-

Day Moving Average on Heavy Volume

A Group of Bearish Indicators

Climax RunsGenerally, climax runs begin in leaders that have

risen for many months then suddenly blast higher. This may be 18 weeks or more weeks after a base breakout. However, they can occur 8 weeks or more after a late-stage base breakout. So, avoid selling on similar signals earlier in the run.

There is usually a rapid price run-up of 25-50% in 1-3 weeks. Typically, the move isn’t on earnings. The stock may be 70-100%+ above the 200 day. 

Indicators: exhaustion gap, greatest weekly price spread, largest daily price increase of run, upper channel line break and heaviest daily volume of the advance.

These will usually correspond with market tops, but not always.

Sunpower’s Climax Run

Sunpower’s Climax Run

A Close Below the 10-Week or 50-Day Moving Average on Heavy Volume

A Group of Bearish Indicators

High Volume Bearish ReversalsRailroad Tracks High Volume StallingNew Highs on Lower VolumeBig Gap DownBroken Weekly Uptrend LineLow Volume Rebound after PullbackLargest One-Day Price Drop on Big VolumeOne Week Down/One Week Up & VariantsPoor Action of Other Leaders in the Same GroupMarket Under Pressure or in Correction – 3 out of 4 stocks

follow the general market trend – consider locking in at least some profits if distribution days increase rapidly

Sell when a group of these indicators occur in a short time

A Group of Bearish Indicators

Broken Weekly Uptrend Line

Railroad Tracks

Poor Action of Other Leaders in the Same Group

Poor Action of Other Leaders in the Same Group