Formulating a strategy on selling, or sitting on the sidelines especially in a roaring bull market is a tough aspect.
Fundamental exits are well defined in terms of extreme overvaluations (where growth for next 2-3 years are captured in the valuations) or change in the growth expected. e.g A company you expect to grow at 25% CAGR for next 2-3 years starts quoting at say 70-80 PE ( it happens in FMCG kind of companies off and on because runway for growth for even next decade is visible) or in another situation where we have bought a company expecting 25% CAGR growth starts growing or commenting about growth at a tepid 10-12% CAGR. But this happens at an interval of atleast a quarter when usually management comes around and comments on prospects for next quarter or few quarters.
Technically I have simplified my processes. In frothy moves I usually look out for signs of stretching of upmoves in form of very high weekly RSI levels exceeding 90, or some kind of divergence in RSI, or stock price reaching twice its 200 dema ( this is usually a crude measure but often works) .
In cases where my techno funda picks, or technical picks fall due to any reason, I usually keep a mental stop loss of around 7-10% of my buy price.
In stocks that I hold for the long term where my fundamental conviction is high, I give a long rope and often prefer to sit through temporary pains.
Having listed all the above basic rules I have for myself, selling decisions are often dynamic and sometimes I prefer to think on my feet and take a call. Most important rule in the stock market is that it follows no rules.
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