IBD's 8 Week Hold Rule
8 Weeks Hold Rule
Institutions account for over 70% of daily trading volume that occurs in the stock market everyday. They have the power of the money to move the market. It usually takes the institutions several weeks to accumulate the entire position in a stock that they are showing an interest in. You can see the rapid rise in the price of a stock with trading volume that usually exceeds the daily average trading volume in that stock. They show up as sky scrappers on the volume bars in a stock chart. As a retail trader, one has to learn to read and decipher these stock charts of increasing price with increasing trading volume.
Here is an explanation of that rule as illustrated by IBD (Investors Business Daily).
The 8-Week Hold Rule
An Exception to Taking Profits at 20%-25%
If your stock gains over 20% from the ideal buy point within 3 weeks of a proper breakout, hold it for at least 8 weeks. (The week of the breakout counts as Week No. 1.) If a stock has the power to jump over 20% very quickly out of a proper base, it could have what it takes to become a huge market winner. The 8-week hold rule helps you identify such stocks, and helps you sit tight so you can reap potential rewards.This rule should be applied to true market leaders, not just any old stock. The company should have strong fundamentals and other CAN SLIM? traits, including quality institutional sponsorship.
Sitting Tight Through a Sell-Off
When a stock quickly rises more than 20% in just a couple of weeks, it's likely some investors will take their profits off the table — that can cause the stock to pull back, sometimes sharply.
So understand that stocks that trigger the 8-week hold rule often sell off fairly hard, sometimes during the holding period. This rule helps you sit through that and avoid selling too soon.
The 8-Week Hold Rule in Action
Learn more about IBD's selling rules with a free 4-week trial to IBD Digital. Take a free 4-week trial now.After Holding 8 Weeks, Should You Sell Or Hold? Once the 8 weeks from the original buy point have passed, you can sell to lock in your gains or continue to hold. If you have a solid gain, and the chart action and general market are still strong, you may want to sit tight and see how the story plays out. It could be a stock that goes on to even bigger gains.
Have a look at the stock charts of the following stocks. These are the stocks that institutions are exhibiting an interest in accumulating them:
- $AMKR
- $AMRN
- $CRUS
- $DXCM
- $FTNT
- $INMD
- $LRCX
- $RH
Use the stock charts of these stocks to sharpen up your skills at reading stock charts with the price and volume bars.
Happy Trading!
Amin