Step
Seven: In the following chart you will
notice that (AAPL), after trading sideways for approximately
eight days, is beginning to show increased weakness.
The stock at this point actually made a gap down on
huge volume, an extremely bearish sign. With the
stock making this kind of move, we would no longer be
willing to assume that the stock will resume its uptrend
and would take the rest of our profits off the
table.
Step
Eight: In the following chart you will
notice that after gapping down, the stock continued on
its downward spiral and could have erased our entire
profit if we had not exited the trade. If this were a
stock that you had purchased for a long-term
investment, you could have simply purchased a Put
option to protect your profits when the stock
initially began to trade sideways. For more
information on this technique take a look at our
strategy on protective Puts. Click
here for more info.
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