This is actually two great questions in one: how do you identify a sell trigger and what discipline is required to sell shares once they hit your target.
Identifying a sell trigger can vary across my different services. For example, in GameChangers and Breakout, I include a target price with any new company that I recommend. I keep a close eye on the catalysts that will move the stock to that price, and when I believe the story has played out, we sell. This happened with SHFL Entertainment (SHFL) in GameChangers last week, which we sold after it was acquired and shares looked highly valued. We had hit our target and with little room left to run, we booked our profits.
With some of the promising discount opportunities that populate the Absolute Capital Return Buy List, setting a concrete exit target at “fair value” – the maximum price you would be willing to pay to buy in – makes a lot of sense. Beyond that point, the stock may have the fuel to keep running, but the rationale for holding it has changed. When that happens, I like to lock in my profit and then get back into the name at the next sign of weakness.
In High Octane, timing is everything. When recommending a trade, I look for specific catalysts that will move the stock (earnings reports, economic data, technical indicators or even company announcements), and I go with a call or put based on where I believe the stock will move on that catalyst. While I generally don’t include specific target prices to sell at, the goal in trading is to make quick profits. If we get the movement we were looking for, I will send a Flash Alert to sell. If we don’t, I either reassess if the story needs to play out or move on to the next opportunity.
In all cases, I recommend doing the math and setting a sell limit in advance that you feel comfortable with. This will help you stay disciplined by taking “irrational exuberance” out of the equation. If the math changes or the stock keeps moving higher, raising the limit is always an option. Otherwise, you have a built-in protection that will keep profits from slipping away.