Ticket to Ride

I think I'm gonna be sad
I think it's today, yeah
The girl that's driving me mad
Is going away
--The Beatles

The sell tickets have been flying over the past few sessions as I've been busy unwinding most of my stock exposure. Most of this exposure has been in pharma companies Merck (MRK) and Pfizer (PFE).

These names have seen a nice runup and are registering overbought signals (as well as some DeMark trend exhaustion signals).


One strategy for making sales into upmarket environments is to stick a stop underneath current prices and roll those stops up if prices trend higher. If successful, this approach reduces the chance of premature exit and help you ride trends closer to the top.

This approach has always been hard for me to do when things get moving like they are now, since there can be significant overnight 'gap risk' (where stocks can open way lower than the previous day's close).

Instead, my preferred strategy is to make sales on the way up. Depending on the size of my position, I might divide my sales into 4-5 pieces. Using this approach, you hope that 'your first sale is your worst sale' as you ride the uptrend to piece out more stock. This approach often finds me leaving the party early but at least I know my exit price and I've flattened my risk.

My stock exposure has been cut from over 30% of assets to about 3% as of this am. Last Friday and this morning's action had that frothy feel to it--often indicative that the final 'panic' phase of a trend is in full force.

They may indeed continue higher from here. But I'm content to have reduced my risk profile and watch the action from the sidelines.

positions in MRK, PFE