Taking Profits, continued
Relative Strength
A stock rises out of a base pattern (more on this in Lesson 7 of the Buying Stocks course) or runs up in price, but the relative strength line does not go into new high ground or lags substantially. This tells you the stock, despite its advance, isn't moving as powerfully as the overall market. Also consider selling if the stock's Relative Price Strength Rating drops below 70.
Moving Average Lines
Pay close attention if the stock's price closes below the 50-day moving average. The 50-day moving average is generally regarded as a stock's possible price "support" level. It may not mean much when a stock dips below this level, but when it closes several weeks below the 50-day line, unable to rally, it suggests investors are abandoning the stock. Also worrisome is a 200-day line that turns down.
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Related Resources:
Review IBD's 20 Rules For Stock Market Success.
Go to the Investor's Corner Archives to read IBD's "editor picks" of classic Investor's Corner columns.
Search our archive of Ask Bill O'Neil Q & A's organized by topic.
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