When Kenny Rogers crooned, 'you gotta know when to hold 'em and know when to fold 'em', he was talking about poker. But the same strategy applies to the stock market, too. You need to know when to sell when a trend has ended -- whether it's to the up or downside.
A good example of this can be seen by looking at the chart of Amicus Therapeutics (NASDAQ:FOLD), which had a long run higher from November last year to a peak in August. That's when it flashed a signal to sell. The Shooting Star Doji -- a small body candle with a long upper shadow -- was your signal to sell. From that point on, the stock plunged, creating a bear flag before plunging again.
It looked to be creating yet another bear flag when it broke to the upside out of its start this week. If you took the Shooting Star as a signal to get short the stock, then the break of the bear flag was your signal to exit the short. Now the stock is pushing higher with support form the momentum indicators and opening Bollinger Bands® to continue. It also has 14% short interest, which could trigger a squeeze as more investors cover their shorts.
Only that prior high from the Shooting Star stands in the way of your investment shooting higher.