After a stock sees a volume dry-up at the peak, be ready to sell at least some shares when it drops very hard through the 50-day moving average on high volume.
William O’Neil India
A great company is like a high-performance Porsche. Volume
is the fuel of stock. If you want to master the stock to sell properly, remember this analogy.
You can learn about the company's potential throughout the
day, its awesome new products and an incredible CEO.
But if the company's
stock, after making a spectacular run, begins to hit new highs on lower
volumes, it will be unlikely to act as a high-performance roadster.
The stock may begin to apply brakes on its spectacular run.
When new heights occur at lower volumes, this is the prime time that you look for serious sales signals.
After a volume dries to the peak of stock, be prepared to
sell at least a few shares when it falls too hard through a 50-day moving
average at higher volumes. Or, the stock may shatter the long-term trend line.
A stock's volume is often above the 50-day moving average
when its price climbs to new high ground. This is where the stock was never
before. There is no overhead resistance, and buyers should make breathtaking
offers with their rising bids.
If it does not drum up the increased volume, then you have a
problem. Also, remember that the up-trending stock already had institutional
support behind it. In this way, it became an up-trending stock.
What do you think will happen if you stop buying big-money
funds? Stock comes under its own weight. And, if you find the stock constantly
making new heights without a solid amount, it is a sign that the tide may turn.
That is, sellers may have a greater influence on the future
prices of stocks than buyers.
Titan scored a new high in May. The stock rebounded from its
50-DMA and made good progress at above-average volumes. The rally further
increased in June-July. However, the gains came in poor amounts in July.
After hitting a new high in July, the stock recovered more
than 20 percent. Similar price-volume action can be seen during October when
Titan built a new high at lower volumes and corrected more than 20 percent from
there.
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