When you’re learning how to trade stocks, it’s important to play defense when you’re on the losing side of a trade. It’s also key to take an offensive stance and protect your gains when a stock in your portfolio makes a big move. Paycom (PAYC) is flashing an offensive sell signal, meaning it could be time to take profits in the top software stock.
Paycom Stock Action
Paycom stock gapped out of a double-bottom base on Aug. 1 and climbed nearly 36% in about a month. But shares dropped 5% in heavy volume Wednesday along with a broad market decline. With shares still up about 30% from the buy point, investors who bought at the last entry may want to consider taking profits in the stock.
How To Trade Stocks: 20% To 25% Sell Rule
That’s where the 20% to 25% sell rule comes in. When a stock has risen 20% or more from a buy point, that’s usually a good time to lock in gains. History shows that stocks tend to start forming new bases after rising this much.
And, with tech stocks currently under pressure, that’s yet another reason to act before Paycom stock potentially logs more losses. Some 75% of stocks move in the same direction as the overall market, and the Nasdaq is down about 2.4% so far this week.
If you have conviction in Paycom, perhaps you only sell part of your position. But keep a close eye on the stock’s action as well as broader market conditions.
Top Software Stock
Paycom is a top software stock on the IBD 50 list of leading growth stocks, with a highest-possible Composite Rating of 99. That means its shares outperform 99% of all stocks in the market as measured by key fundamental and technical metrics. Those metrics include earnings and sales growth, profit margins, return on equity and relative price performance.
Top stocks tend to come from top groups, and software is the leading sector in the stock market so far this year. The software sector has collectively risen some 35% in 2018.
