X US Steel, Jan 26, 2010

How to decide whether to buy or sell ? Use all you have, start with gut feel or intuition AND use all the tools the world of investing offers. Here is a good example in the form of US Steel or , shown below.

X Jan 26, 2010

This stock trades around $20 for about the length of this chart and probable more; in fact it is basically down hill for many years dying with the rest of the US rustbelt under the weight of mismanagement, inefficiency, union demands etc. etc. All of a sudden the China factor comes out of nowhere in early 2003, presumable because the population there had grown from 1.4 billion to 1.400.000.001 causing the proverbial “tipping point” to occur.  Voila, in a mere 4 years this sleeper increases in value by a factor of 10. Our maestro Greenspan would certainly not have recognized the small bubble forming –BUT ANY SANE PERSON WITH A GUT WOULD AT LEAST BE AMAZED .

   X Jan 26 2010, 2                           

It drops even faster than the financials following EW rules to a tee. Also observe that the RSI,  relative strength indicator WARNS every single time that something is about to happen. It did again a few weeks ago and today the stock got hammered more than 10%. these indicators are worth paying attention to.

Is any of this predictable? Absolutely not ,  but is there a good reason to sit on a 10-bagger without a trailing stop-loss? Absolutely not. Unfortunately this is the part of “buy low sell high” that is most often not understood or practiced. It takes away 1/2 of the potential!