To Sell or Not To Sell ?

"Sell"? After selling the worry is that the stock will start to run, and the worst thing is it runs away very very fast.

"Not to sell"? The worry is that the price will drop back to the purchase price and it can be worst, the price can go much much lower than the purchase price.

For longer term investor that has no time to monitor the market, it is better to hold on to the stock until the major up-trend is over before end of 2009.

For those thinking of taking profit before the correction set in and with the intention of buying back at a lower level, the best way is to look at the market as well as the stock's chart and to decide whether it is the right time to sell. For example let's look at the following Lion Industry chart.

Based on the wave count, the stock has completed its wave 1-2-3-4 and is currently at wave 5. The minimum level for wave 5 is the top of wave 3 at Rm1.05. Wave 5 usually can be a temporary top follows by a corrective wave that can bring down the price to wave 4 level of Rm 0.80. Watch out for possible extension of wave to 6-7-8-9. The technical indicators of stochastic oscillator and williams momentum indicator have remained at the upper range for an extended time is another sign for taking profit with the intention of buying back later to ride on the next higher level wave.

For TA wave 5 has formed, no harm in taking profit. Money in the pocket is always better than profit on paper. The same is true for OSK as shown below.


It is good to look at the overall market index such as KLCI to double check the timing for taking profit. Looking at the KLCI above, the composite index has completed 5 waves with all technical indicator showing an over-bought situation, the probability is high that the timing is right. Technical indicator alone without the wave count is not that reliable as a timing device. Just look at both the indicators as shown above, the first time the indicators have moved to the top was when KLCI reached 880 in early April, since then the indicators moved side-way at the top while KLCI put on another 110 points to reach 990. But in a 'normal' market these indicators usually 'well behaved'.

KLCI requires confirmation from Dow in its wave count. As shown above, the trend for both KLCI and Dow is almost the same.

The Las Vegas Sand's chart and indicators illustrate clearly the danger of using technical indicators as timing device without considering wave count. In November it was right to buy when indicators hit bottom. But in mid January when both indicators have dropped to the bottom, it is disastrous to buy. The stock price was about US$6.00 then. The price continued to drop until US$1.42 in March while the indicators continued to stay low and moving side way. In late March when the indicators reached the top for the first time the stock price was US$3.00. To sell at this point is again a mistake. From US$3.00 the stock price continued to climb until US$8.00 while the indicators were moving side way at the top. This phenomenon always happen during extreme market condition.