Defensive Sell Signals


When using MarketSmith, finding stock ideas becomes second nature. We have the tools to efficiently research companies with the same characteristics of previous leaders in the market. But, obviously, not all of those stocks take off. One of the most investing  decisions to make is when to walk away.

The first rule of investing is simple: Don’t lose money. We should always play defense first. Remember that in financial markets there is a time for everything. There is a time to be fully invested, a time to be on margin, and a time to be on the sidelines. Recognizing sell signals will help you identify the appropriate action for staying on the right side of the market.

The most classic sell signal we use in our shop is the break of the 50-day moving average on high volume. We all know that institutions will typically support their positions at the 50-day, so a breach of that support level would be a bold indication of institutional selling.

Another sell signal to look out for is the largest one-day point loss. Each stock has its own unique personality. Following your stocks daily will help you develop a feel for what is normal and abnormal in terms of the way it trades. A stock’s biggest day down will give you confirmation that its behaviorhas changed and stronger distribution may be imminent.   

To learn more, click here to view this week’s webinar on “Defensive Selling.”  If you have any questions, you can always reach us at (800)424-9033 or at

Best Returns,

The MarketSmith Team