In the current bull market, Magnificent Seven stocks like Nvidia (NVDA), Meta Platforms (META), Microsoft (MSFT) and Amazon.com (AMZN) continue to post or pursue record highs. But at times like these, investors should have — and follow — time-tested rules on when to sell stocks to protect profits.
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IBD’s recommended market exposure level provides one way to gauge how aggressive or defensive investors should be. Check The Big Picture column or this page to see the current level and monitor any changes.
As the market indexes ride an underlying uptrend, keep an eye on where they trade in relation to their 50-day moving average. Generally, when the indexes climb over 5% above that benchmark line, the chances of a pause or pullback increase. On March 1, the Nasdaq closed 5.8% above the 50-day then pulled back, but found support at its 21-day exponential moving average. Currently, the Nasdaq trades around 4% above the 50-day line.
Nvidia has slipped off the record high it hit on March 8, but has powered back up to move within striking distance of that all-time high. Shares of NVDA stock now trade over 960, just shy of its 974 high. Fellow Magnificent Seven stocks Meta and Amazon also stand near record highs, as does Microsoft.
Alphabet (GOOGL) hit a record high in January, but then gapped down after reporting earnings. The stock found support at its 50-day moving average and bounced back until taking a hit on controversy surrounding its Gemini chatbot. Alphabet crashed below its 50-day line on Feb. 26, eventually falling below its 200-day line. But Google stock has just bounced back above its 50-day moving average as it now targets a new buy point. The stock got a boost on a report that Apple (AAPL) could license Gemini from Alphabet for use in iPhones.
Sudden drops on unexpected news, as well as just as sharp rebounds, may be unavoidable. But monitoring action around key moving averages in individual stocks is a key factor in determining when to sell or sit tight. Investors also should pay attention to how overbought or oversold the general market may…
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