Ask Colin

What do you mean when you say to sell a stock if it stops trending up?

There are many ways to determine trend. Whatever method you use should be applied to this rule.

My method is to analyse peaks and troughs. In Shares Charting Guide 2002, I show my three sell signals and how I set stop-loss levels. If I get one of these sell signals, I sell immediately.

You mentioned a trend line in your full question (I abbreviate questions for the web site). You should realise that a trend line is not measuring the existence of a trend. It is describing the speed of change in price in a trend. It will tell you whether the trend is speeding up or slowing down. When price falls below a trend line, the trend may end at that point, but it is more likely that the actual end of the trend, defined in peaks and troughs, was earlier or later than the trend line break. If the trend ended earlier, you should have sold then. If it is still intact, you might take some of your position off because the trend is slowing down and await developments.

Keywords: