When Seeing Green, When To Sell?

(I always advocate enjoying your profits NOW! If you have a day job, all that you 'earn' from the PSE should be extra money. Use it to take a vacation now! You wont be able to enjoy trips as much when you compound compound compound and then by the time youre willing to shell-out money, you're rickety old! You cant walk 500 meters any more out of the hotel!) 

I need to re-start this blog, because several people are asking me specific questions through email.

Im certainly not an expert and my profit from the PSE will not be enough, on its own, to raise a family. But I got both my two kids' tuition fee + a trip to El Nido - Miniloc for 3 from the surge in the market last year. Im not [yet] the swashbuckler who can resign from a dayjob to trade full time in the comfort of home, BUT expert or not, still, I'd like to attempt to answer specific questions.

One perennial question is something along this line... Im already in GREEN (profiting), but how do I know WHEN TO SELL?

If you'll follow CANSLIM, the recommendation is to sell when you see +20%. They say that even in an upsurge (and CANSLIM does not recommend that you enter a market without seeing a general market upturn), the stock will take a breather (go down) after achieving +20%. And so it is recommended to sell at +20%. If the stock that you sold is a favorite and you truly believe it is still cheap, follow the stock and buy again when you think it's done taking a breather. I usually buy back if the stock has gone by -5%, -8%, or -10%. Those buy-again points are not based on any scientific or statistical analysis, I just like to buy at those level.

One exception to the +20% rule though: if the 20% was achieved in a few short weeks, CANSLIM recommends that you hold the stock and study more, to check if there's probably some more juice left. Why is it jumping so high? Is a big fund hell bent on buying it up? Is there news of a potential big, big change? If yes, continue to hold. BUT for me, I'll sell any stock that I have +50% on.


Investopedia also has particular suggestions. The two theses that apply to our case in that article:
2) sell when the price appreciation is rapid ("The best investors are the most humble investors")
3) the price is too expensive (valuation is no longer justified by earnings). In short, too high a P/E.

Sets of experts (or believing themselves experts) in local forums will strongly object to these two proposals. For #2, many believe that you should ride the stock until the upside is over. BUT how do you know when the runup is done until the following day you see the stock breaks down 3-5%?

And then for #2, JFC and DNL are seemingly clear exceptions. Both now at astounding 40-50 P/E's but still are showing strength. How do you know when the limit is really the limit?

As usual, the final method will be according to what suits your personality and poise (you have to know yourself!) I for one sell when I think Im already comfortable with the profit on one stock. When you reach that 'satisfaction,' it wont be too much of a heartbreak if you see the stock surge further. (There will still be that bite, but not that much any more). You trade stocks one at a time after all. If PGOLD already gave you 5000 PhP on a 30000 PhP accumulated position, wouldnt you be happy with 5000 PhP already even if it still goes up in the next few days? Only greedy lizards wouldnt say theyre already happy. And would you want to be tagged a greedy lizard?

These rules by the way don't apply to bazura stocks.

Bazura stocks you only ride on an apparent swing, and when you have the time to closely follow the trades (by-the-minute, daily). I sell a bazur when see +15%, and then thank heavens I was there when the manipulators selected that specific bazur to push up.