Is It Time To Sell?

Knowing when to sell may feel like rocket science if you’re new to investing but it can be quite simple. While technicians may bamboozle you with indicators and fancy signals, the best traders in the world keep it straightforward.

Take for example one champion trader who went short the market recently. At a glance of a regular chart, it may not be obvious why the timing is so clear.

Can you spot the perfect day in the chart below?

Key Points

• Successful traders often use simple strategies, focusing on clear trend breaks and support lines for optimal sell or short signals, rather than complex technical indicators.
• Waiting for a definitive downtrend break before initiating bullish trades is a smart path for S&P 500 traders now.
• Be wary of impulsive dip-buying during downtrends and wait for clear market reversal signals.

When To Sell?

Let’s now revisit that same chart as above but with just one additional line and its break, highlighting the ideal day to close out bullish positions, and even to go short.

Clearly, a support line was broken that had held since the start of the year. You can get all caught up in pattern analysis. For example, was it a bearish engulfing candle and so on and so forth.

But the thing that matters most is the trend that the market had steadily adhered to for months was violated in devastating fashion. A clear break took place, and despite a quick re-test of it, a rejection and failure followed.

So now what, when is it time to buy?

When To Buy?

The angle of price descent offers no comfort to bulls at this time that a reversal will take place anytime soon. But it might. That’s not for a good trader to anticipate or predict, or even trade.

The best traders will simply now wait. In the words of Jess Livermore, the money is made in the sitting, and hardest things to do is sit, and be patient. Yet that’s now what this downtrend commands, patience.

When the downtrending resistance line is broken, only then will it be time to consider bullish positions.

For those who can’t control their emotions, a key requirement to long-term success, buying the dip will be ever so tempting now, which is why warnings over catching a falling knife are so widely shared.

If you want to succeed long-term, you can trade every day but you’ll need to find these breakouts on the bullish and bearish side among other symbols. For the major market index, though, the path is clear now. Wait and see until it reverses, and then step in with a disciplined approach.