Ok, so everyone knows that it is pretty much impossible to predict what the stock market will do. If that were the case, there would be a lot of millionaires who made their wealth from the stock market … wait there ARE a lot of millionaires that made their wealth from the stock market. Ok, if MORE people could predict what the stock market was going to do, there would be a lot MORE millionaires who made their wealth from the stock market and definitely a few more billionaires to join the likes of Warren Buffet.
Now, once again no one can predict the future. However, there are a few tools that investors can use to put the odds in their favor. Nothing is guaranteed, but when the odds of something happening are in your favor you can be sure that you will have a much greater chance of succeeding. One of the tools I want to get into is knowing when to sell stocks. I also want to drill deeper and talk about specific days in general that are good for selling.
Let’s think of an example, based on recent events you know that stock markets tend to have massive drops if something really bad happens in the world. A good example that everyone is probably familiar with would be the 9/11 attacks on the World Trade Center in New York. The market dropped so much that trading was halted. The following day, the market dropped even more! However the following day after that major event, the market tried to rally (bounce back) a bit. That would have been a good day to sell.
The Monday after stock options (usually the third Friday of every month for most stocks) expire is a good day to sell stocks. In the third week of every month, stock options and stocks experience high levels of volatility and this is usually to the down side. What I mean by this is that stock prices tend to drop somewhat significantly during the third week of every month.
If stock prices experience big down days, the day following that down day will usually be a rally as the short sellers will try to cover their positions and as other investors will see stocks as oversold. Stocks NEVER go straight down and never go straight up. There are always down days and up days in between a stock’s move to higher highs or lower lows.
The First trading day after a holiday. Trading is usually light leading up to a weekend or leading up to a holiday as most brokers take vacations. Trading then tends to pick up once the brokers and big time traders come back from vacation.
The days when there is great news about a company such as earnings or a great new product. Positive earnings reports on a stock make great days for selling a stock. This kind of news usually sends a stock price higher, and these are perfect days for selling.
The conclusion is that you should learn to identify events that would cause a stock to go up in price. Lastly, as a rule of thumb NEVER buy on an UP day, always look to take profits on up days.