5 Common Sell Signals in the US Market
learn
basic

5 Common Sell Signals in the US Market

basic

3 min read

img

If you've already figured out when the right time to buy a stock is—awesome! Next up is figuring out the right time to sell.

Depending on your investing strategy, sell signals can help you determine when to exit your position if you don't plan to stay invested long-term. These five sell signals are commonly used in the US market, and you don't need to be an expert to use them.

1. A high relative strength index is a key sell signal for investors

A stock's RSI (relative strength index) charts the speed and size of price changes. In chart form, RSI showcases an investment's trading trajectory, with ascending triangles and descending triangles to represent whether a stock is overbought or oversold, respectively.

Get your hands on a stock's RSI (from a technical analyst) to determine its standing. An RSI above 80 means a stock is likely overbought, which indicates it could be a good time to sell.

2. A high price-to-earnings ratio

A stock's price-to-earnings ratio, or P/E ratio, is a simple equation. It's the share's market value divided by earnings per share (EPS). You can find a stock's EPS after each quarterly earnings report.

The P/E ratio tells you how expensive a stock is versus its earnings. A P/E ratio that's higher than the industry average could mean the stock is expensive. That's a sell signal for many investors.

3. High short interest

Hedge funds and institutional investors can short a stock, which means betting on the stock's value to decrease. You may know this if you've ever seen the movie The Big Short.

You can find out how many people are shorting a stock by looking at its short interest ratio. If a stock has a high short interest ratio (say, 10–20 percent), that means that a lot of investors are expecting (or hoping) for it to fall. That could be a sell signal in the right circumstances.

4. Debt signaling

Debt signaling is a helpful tool when analyzing a stock. Analysts use debt signaling to predict a stock's future performance based on its current debt and how the company is planning to handle it. Of course, Evergrande Group—the Chinese property developer that owes $300 billion—is an extreme example of debt, but many companies carry slimmer weights.

Stay tuned to the company's announcements to find out what its debt decisions suggest. Taking on new debt at low interest rates could signal growth opportunities. However, restructuring, delaying payments, or even filing for Chapter 11 bankruptcy could signal a sell.

5. Another sell signal to know about: Poor sentiment

It's difficult—and often impossible—to quantify sentiment. However, bad news like executive scandals, antitrust investigations, and subpar earnings calls can be a bad sign for a stock. Investors typically move quickly on this kind of news, so stay plugged in.

You can even turn on notifications for a company's name in your search engine to ensure you're acting on the trade as soon as you need to (although this is likely only necessary for riskier investments).


Never miss a thing!

news and markets updates

* Terms apply

Raseed Invest Limited © 2021 - All Rights Reserved.

Raseed Invest Limited (“Raseed”) registered in the Dubai International Financial Centre (“DIFC”) and is regulated by the Dubai Financial Services Authority (“DFSA”) to conduct financial services “Arranging Deals in Investments” with a 'Retail' endorsement. Raseed does not provide any trading or investment advice and shall not be responsible for any loss arising from any investment based on any general information provided by Raseed or as may be available on Raseed’s website and other web-based services (collectively, the “Website Services). Raseed does not warrant that the information is accurate, reliable or complete or that the supply will be without interruptions. Any third party information provided through does not reflect the views of Raseed.

The content of the Website Services provided by Raseed is only intended to provide you with general information and is neither an offer to sell nor a solicitation of an offer to purchase any security and may not be relied upon for investment purposes. Any commentaries, articles, daily news items, public and/or private chat publications, stock analysis and/or other information contained in the Website Services should not be considered investment advice.

Raseed shall not be liable for any delay, inaccuracy, error or omission of any kind in the information provided by Raseed and/or any third party information provider or for any resulting loss or damage you may suffer as a result of or in connection with the information supplied by Raseed and/or any third party information provider. In addition, Raseed shall have no liability for any losses arising from unauthorized access to information or any other misuse of information.

Any opinions, news, research, analysis, prices, or other information contained on our Website Services or emailed to you are provided as general market commentary, and do not constitute investment advice. Raseed will not accept liability for any loss or damage, including, without limitation, for any loss of profit which may arise directly or indirectly from use of or reliance on such information. Each decision as to whether an investment is appropriate or proper, is an independent decision by you. You agree that Raseed has no fiduciary duty to you and is not responsible for any liabilities, claims, damages, costs and expenses, including attorneys’ fees, incurred in connection with you following Raseed’s generic investment information. Raseed makes no representations as to whether a particular investment is appropriate or suitable for you.


View important disclosures