WHEN TO SELL ON WEAKNESS      A HIGH ACCUMULATION "BUBBLE" STOCK              THAT HAS ALREADY MOVED UP 50%                    FROM ITS 6-MONTH LOWS                                           by William Schmidt, Ph.D.                                  Author of TigerSoft and Peerless                                      (C) 2010  www.tigersoft.com                                                       See also:  TigerSoft's  When and What To Sell                                        8/7/09           Red Warning Flags in Over-Extended Low-Priced Stock                                                  7/17/2009     When to Sell Explosive Super Stocks                                                     7/22/2009     Apple Computer at Its 9 Previous Significant Tops.

Here we are talking about stocks that have previous shown high levels of                            Accumulation and now have moved up more than 50% from their 6 months lows.                                 This is a topic that we have discussed before.  It "bears" repeating                           because the market is now up so much since the bottom and because we know                           it is always hard psychologically to sell at a loss in a strong market, Yet that                           is the exactly what we must do.  This is the safest way to guard your                           investment capital. You must do that.                                 The stocks that typically are run up in a speculative market very often                           do not have lasting power.  First they are accumulated, which we spot.                           They they make new highs and are pumped with glowing stories and                           by their exciting price action.   Our research shows that most such stocks                           reach their peaks a little after a year from the first bulge of "insider buying",                           when the Accumulation Index surpasses +.45.  But this is only a general                           guideline                               As sure as night follows day, at some point, most of these stocks                           are dumped or subjected to lots of heavy-handed profit-taking...                           unless, of course,  they found great riches in mineral wealth or                           created something truly unique or are bought out.  Maybe a quarter                           of the very high Accumulation stocks escape Newton's laws of                           gravity.    Three quarters of these stocks are "piffle" stocks that have                           their moment in the sun and then settle back, sometimes for years.                            If you look at long-term charts of a sample of low priced stocks, you                           will quickly see how long they languish.  They are like 10-year locusts.                            You do not want to wait that long for such a stock to recover and                           again fly high.  Many never do.                                 So, if you're going to play with the hottest and most volatile stocks,                           it is especially important to follow some rules to preserve capital and                           sanity.   (We would also sugsest using these rules with high caps stocks                           and blue chips.  But that is another subject.)                              Remember the adage "time is money".  Bull markets like the one we are                           in now occur for a limited time only.  If a stock is not doing well and others                           show high Accumulation and make new highs, move your money, we would                           advise, to the more powerful stock from the weaker one.  At the same time,                           do not be in a hurry to sell a stock that is rising, say, 10% to  20% a month.                            That price action will draw hot performace money into your stock each time                           it makes a new high.  Stocks that do not break their rising 65-day ma for                           a long time have probably trapped lots of short sellers.  Each new high                           will cause some of them to panic and cover on strength.  So, keep your                           money in stocks that look and act like the "explosive super stocks" we                           show on this website.  Buy more of the best, as long as they are not  up                           more than 30% above their rising 65-day ma or unless they are                           breaking out above an obvious horizontal consolidation pattern.                              So, we must take up the subject of when to sell on weakness to insure                          against a bigger loss and maximize net portfolio gains.                               Normally, general market sell signals from Peerless would allow us                          to sell on strength.  Usually, we would be selling when Tiger's Professional                          Closing Power breaks a long uptrend or after there is a big divergence                          between it and apparently strong price action.  If a stock becomes                          hyperbolic, we have also suggested simply using a French Curve to                          draw an accelerating price support line; or using a 10-day ma for a                          stop loss, or using a sell stop 10% below its recent highs.                                                      But let's say, you chose to ignore Peerless Sell signals, that you                          do not pay attention to signs that an explosive super stock is weakening                          internally, that you decide not to put a Sell stop in or Sell on a break                          in an over-extended Closing Power uptrendline.  What should you do then?                              Here are our suggestions for when to sell on weakness thin, volatile                          "pump and dump" bubble stocks that have already risen 50% in the                          last six months.                                            RULES FOR SELLING STOCKS ON WEAKNESS                            IF THE STOCK IS UP MORE THAN 50% IN THE LAST 6 MONTHS.                               Sell when the stock closes 2% below the 65-day ma if the Accumulation Index                          is negative if:                                                   the stock is up more than 200% in  6 months,                                                   shows a head and shoulders pattern or                                                   displays a bearish "hands above the head pattern"                             Alternatively, Sell when the 65-day Closing Power turns down even if the                          Accumulation Index is positive if the stock is up more than 50% in the                          last 6 months.                       (This revises our earlier counsel to use a 50-day ma for this purpose.)                            Whipsaws are inevitable.  Sooner or later you will sell a stock only                        to have it quickly turn right back up from a support level, a trendline                        or the 30-wk ma.  See LPSN below.  If it helps keep you disciplined,                        Sell and be prepared to buy the stock back if the stockt gets right back                        above a rsing 65-day ma with a positive Accumulation Index and a                        rising CLosing Power.  In the long run, using these rules will preserve                        capital and pevent debilitating losses to your count and your psyche.