“Jim Cramer’s talking about gold—time to sell!”
“They’re talking about uranium on CNBC—time to sell!”
“Goldman Sachs says to buy copper—time to sell!”
“New all-time highs in XXXX—time to sell!”
There’s always some wise guy on Twitter pouncing on bullish headlines as a reason to sell. But at some point, we do need to sell or take profits… but how do we know when?
This is a particularly pressing question for long-suffering uranium bugs, who are finally seeing their day in the sun. They’re worried about letting big wins slip through their fingers—and just as worried about cashing out too soon.
So let me first say that I think this uranium bull has a long way yet to run.
After this month’s scorching rally, it’d be natural to see some correction, but I think we’re still a long way from the top.
What if I’m wrong?
There are ways to avoid going down with the ship.
First, if you haven’t read my general thoughts on exit strategies, that’s a good place to start. We should always have an exit strategy in mind whenever we invest or speculate. It makes it easier to act when our goals have been met—or the trade has failed.
As for when to sell winning stocks, my old mentor, Doug Casey, taught me to sell half on the first double. That’s for resource speculations—mining stocks—which he always called the most volatile stocks on earth. (Then Bitcoin came along and the cryptosphere took the crown for most volatile asset class.)
This strategy locked in many wins for us—and prevented many losses—back in my Casey days.
But it has an obvious flaw: if one sells half when a stock goes vertical and doesn’t stop at a mere 100% gain, one can leave a lot of money on the table. Strictly applied, it can turn a 10-bagger into a 5x winner. Gains of 500% are nothing to complain about… but people did. Constantly.
So I got to thinking about it and added a trailing trigger component to Doug’s idea, calling my version of the strategy the Upside Maximizer. If you haven’t read it yet, I encourage you to download my free report on the Upside Maximizer.
I won’t rehash the whole thing, but let me stress two key points:
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The essential idea of my Upside Maximizer strategy is to let winning stocks keep ripping higher until they correct with more than usual volatility, and then lock in the win. If we take profits on a 10-bagger after a 200% gain or a 500% gain, we end up with a far bigger win than if we sold half after a 100% gain—even if we don’t top-tick the sell.
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Taking profits does not have to mean selling entirely. How much profit to take can and should depend on the speculation in question. If we think the market is tanking or the company is about to fail, selling all our shares and closing the trade would be the smart way to go. But if the story remains strong and we’re looking to make sure we don’t let a big win turn into a loss, we can just recover our initial investment—that’d be just 20% of a 5-bagger, not half—and still retain a lot of whatever upside there is in the story. Or we could do something in between, depending on the circumstances.
This last point is really the key idea I want to drive home today.
I encourage all uranium bugs worried about how to play the current breakout not to look for some guru claiming to know where the market will top.
No one can time market tops reliably. Not I. Not Doug. Not even Rick Rule.
But we don’t have to.
By using an Upside Maximizer strategy, we can ride this bull as far north as it wants to go, taking profits or selling as fits each individual speculation.
That’s what I plan to do with my own hard-earned money in this space.
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