Taking Profits, continued
How To Read Sell Indications From Stock Charts
Often, the most important sell indicator is the stock's price and volume action as shown on a chart. Many times, stocks break down their upward trends before any negative signs emerge from fundamentals, such as earnings, sales, profit margins or return on equity. The following indicators can flag weakness in a stock and can be observed with the aid of IBD Charts.
Volume Clues
If a stock's price falls persistently on heavy volume, it usually signals a shift in professional investor sentiment in which sellers predominate, making any price advances more difficult. Another red flag is a stock making new price highs on lower or poor volume.
Price Clues
The number of consecutive down days in price vs. up days will likely change and increase once a stock begins falling from its top. For example, a stock will close lower four or five days, followed by two or three days closing higher, compared to an earlier pattern of four days up and then two or three down.
Churning
After a substantial advance, the stock's trading volume increases but its price doesn't move up much for several days. This is called churning, or heavy volume without further price progress.
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