Guidance from O’Neil

I’ve been spending a lot of time thinking about what I should do with these paper profits I’ve been sitting on. My “Don’t Make a Buy or Sell Decision while the market is open” rule has saved me from cashing the positions out early about a dozen times in the past week. I’m still not sure that I’m doing the right thing by holding these gainers.

In search of reassurance yesterday, I reread the “When to Sell and Take Your Worthwhile Profits” chapter of O’Neil’s How To Make Money in Stocks. The chapter goes over climax tops, taking 20% profits, and some other details. What really stood out to me was “Don’t take profits during the first eight weeks of a move unless the stock gets into serious trouble or is having a two- or three- week ‘climax’ run-up” and then it goes on to say that “Stocks that show a 20% profit in less than eight weeks should be held through the eight weeks unless they are of poor quality.”

So that settles that. As long as $PCLN keeps acting right I will hold it until at least April 10. However I also think I will be implementing something I learned from the Disciple book which was that if a stock that generally respects its 10-day line crashes through it and then spends the following day below it then you should sell. I’m going to pay closer attention to both of my positions with respect to their 10-day averages as well as keep Eddie Ramierez’s Sell Rules in mind.