Yesterday, shares of Micron (MU) dumped 8% in after hours trading, after it reported earnings on the market close. It’s a major chip stock and it was trading at a 52-week high just last week. Most major chip stocks have been doing well this year, going up with sector leader NVDA.

That hasn’t been the case, though, with shares of AMD, and that concerns me about that stock. You can see in the chart above how its relative strength AMD/SPX ratio has been trending down since March.

A stock like this should be doing well when it’s sector is the red hot sector of the year.

Something is wrong with it, and stocks that lag their sector and the market averages tend to become terrible stocks during a market correction or when a new bear market comes.

I don’t own AMD, but it is the type of stock I’d be looking to sell if I did.

When would I sell it?

Let me share with you an idea on that in a few moments, at the end of this message.

First…..

And…..

The absolute ideal time to sell a stock is when you find something better to buy.

Notice I didn’t say anything about cutting losses, I used the phrase “ideal time.”

That’s the key in that answer.

Yes, stop loss orders, or some alternative system to cutting losses, play a role in controlling risk in an account, and the bigger the positions you use the more important that is.

Typically, I don’t take giant positions in individual stocks, so I tend to simply sell something that doesn’t seem to be working after a period of time and just taking a loss on it and looking for a new trade or selling to get into a new better idea when I see one.

When you take losses you build up tax losses that you can use against current or future capital gains.

I tend to sell more stocks I have losses on more than I do ones I have gains on.

I also find that having some cash reserves, and not being 100% fully invested, puts me in a position where I have a reason to always be looking for new trends in the markets. The danger people get into is being 100% invested and then getting complacent after gains build, so that they stop paying any attention to what is happening.

If you are not a WSW Pro member now is the time to sign up, and save money, because the price is going to jump by 57% in just a few days.

To do that just go here:

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-Mike

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