There’s more of an art than a science to this. A countertrend sell signal tells us the stock has moved so far in such a short amount of time that there’s a higher probability of a pullback than for it to continue. But that doesn’t automatically mean you sell.
The first thing to check is the underlying fundamentals. If a stock is meaningfully below where you think its true value is, you’re more likely to ignore that sell signal, because it’s a short-term momentum warning, not a market top. It’s just saying the stock is overbought and now isn’t the time to be buying more, not that you have to sell what you already own.
The second exception is in the very early stages of a big move. Sometimes you get a bearish signal trying to capture what looks like a good selling opportunity, right as a stock is just starting to break out. When there’s enough evidence the market is turning the other way, you can ignore that signal too.
Learn how to read momentum signals with more nuance at optionsplay.com/op-socials
#OptionsTrading #TradingSignals #OptionsPlay #TradingTips #StockMarket #Investing #LearnToTrade #TradingEducation
