MGM-QUNR-JMEI-RAD

These four stocks (we'll get to them shortly) all saw 5% or greater rallies on March 17. After a big move do you hold or sell? It depends on the context. While recent price action isn't going to tell you what is going to happen next (there are no technical tea leaves), it can give an idea of the stock's tendencies. Those tendencies can help you decide if you want to hold a position for a more profit, or sell it to lock in the gain. Every one of these stocks has a different context, so the examples may help with the decision to hold or sell other stocks as well.

MGM Resorts International (MGM)

Since the start of 2015 MGM Resorts International (MGM) has been channeling higher. This choppy rally is taking place within a longer-term uptrend. On March 17 the stock jumped 10.58%, putting it near the middle of the channel its been trading in. If long, hold for a bit more profit. $23 is a possibility, as that is near the top of the channel, and the price spent quite a bit of time around $22 in February and early March. While the price could continue to rise, avoid getting greedy. There's a lot of resistance between $23 and $24. (For related reading, see: Rising Trend Channel Breakouts — Acceleration or Top?)

Qunar Cayman Islands Ltd. (QUNR)

Qunar Cayman Islands Ltd. (QUNR) bolted to the top of a rising four-month trend channel and is trading just above the August $31.85 high after a 10.15% rally on March 17. With the price entering a potential resistance area, there is nothing wrong with selling. This is the best price the stock has seen in almost a year. The longer-term chart reveals the price making higher lows since July, and the March 17 rally breaking above a triangle pattern. Therefore, there's also evidence the price could continue higher. Expect a lot of resistance between $35 and $36.73 — where the price peaked in March 2014. If holding, consider placing a stop loss at $30 to lock in some profit in case of a reversal. (For more, see: Interpreting Support and Resistance Zones.)

Jumei International Holding Limited (JMEI)

After a long downtrend, Jumei International Holding Limited (JMEI) has been flat all year. The bulls are viewing it a basing pattern. The 7.72% rise on March 17 has the price moving toward a breakout above this sideways channel. If long, hold...but with a stop loss below $12.50 to avoid holding through another down wave should the downtrend continue. Wait to see if the price breaks above $14.50. If it can't, there is no reason to be long against a long-term downtrend and in a stock that is moving sideways. On the other hand, if the price does break above this sideways channel it could set the stage for a rally to $17.50 or higher. (For more, see: Upside Breakout Coming? Examine the Chart Patterns.)

Rite Aid Corp. (RAD)

Rite Aid Corp. (RAD) popped up 5.63% on March 17, right off rising trendline support. With the trend moving nicely higher since October, hold this one. A better profit taking location is between $8.30 and $8.50. This is right near the top of the 2015 price channel, and just below the 2014 high of $8.61. Trail a stop loss up to $7.20 to avoid holding through a decline should a reversal develop. (For more, see: Tips for When to Buy, Sell or Hold.)

The Bottom Line

An entry point isn't the only thing that matters. You need an exit plan too. Stick to the exit plan you've made. It you don't have an exit plan for your trades, create one now. These four stocks saw big moves recently, but that doesn't automatically dictate whether you should be hold or sell. Look at tendencies. There are no sure things in trading, but you can often come up with a simple probability assessment of where a good exit point is. If the price has had a tendency to a reverse at the top of a trend channel, that is a potential exit point. Losing trades do occur, so no matter strategy you opt to use, keep risk on each trade limited to a small percentage of account equity. 


Source:
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