One: If the stock's 20% gain comes in the first two or three weeks after the breakout, then it should be held at least eight weeks — barring outright sell signals or a severely negative change in the market trend. True market leaders often get a fast start. You don't want to sell such a stock too early.
Two: If a market winner took longer to reach the 20% mark but has three quarters of EPS growth acceleration in a row, you might want to hold the stock.
Three: If the 20% gain came slowly and from a second-stage base or later, you should sell. Most big winners correct after a 20% to 25% gain. A third-stage base is prone to fail. So, why hold for that?
Four: If the gain came in an erratic fashion, sell. It doesn't matter if the stock or the general market is to blame. Such a stock is likely to move against you quickly.
Five: If you've taken a 7% or 8% lossrecently, then the bias tilts toward taking the profit in the 20% to 25% gainer. It's prudent to keep a 3-1 ratio between gains and losses. You can be right just once every four tries and still break even or make a small gain.
Six: If you've taken several 7% to 8% losses and have no stock up 20% to 25%, consider taking smaller profits to erase the losses. Then you should step back and study your buys and sells to determine the reason you are losing.
