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U.S. flags hang from the New York Stock Exchange building, February 15, 2011. (JOSHUA LOTT/REUTERS/JOSHUA LOTT/REUTERS)

U.S. flags hang from the New York Stock Exchange building, February 15, 2011.

(JOSHUA LOTT/REUTERS/JOSHUA LOTT/REUTERS)

Schizas’ Mailbag

A perfect example of when to sell a stock Add to ...

Good morning Mr. Schizas,

I would like your opinion on NYSE Euronext. I have a small position in this equity at $20.00.

Should I hold on or sell now?

Thank you,

David

Hey David,

Thanks for the assignment and congratulations on a great trade! NYSE Euronext Inc. is operating under a takeover offer from the IntercontinentalExchange Inc. which surfaced in December of 2012. The original offer had a number of cash and stock options with a cap on cash in the deal. I would suggest that you consult with investor relations at NYX to get the latest on the offer. When considering how to manage a takeover you have to realize that there are a lot of moving parts.

More Related to this Story

A big deal that reduces competition will get a lot of regulatory scrutiny especially in Europe. Then the deal has to pass the gauntlet of market participants who are opposed to the transaction and then the shareholders have to sign off. Finally there is the further uncertainty related to a competing bid. You never know who might have sharpened their pencils and decided to make a competing bid. That’s pretty heavy traffic on the way to the close. The trading price of NYX is ahead of the December offer price as the shares of ICE are up substantially.

A review of the charts will help you decide if the stock is a hold or a sell.

The three-year chart depicts the explosive advance that the shares have enjoyed since December. There aren’t any signals that I can see suggesting that there is more to come or that there is a severe breakdown in the making.

The MACD and the RSI on the six-month chart are both bending lower, indicating that some selling is coming into the stock. At this point I would say it is a pullback to support at $38.00, not the start of a trend reversal.

In my experience when someone asks if they should be selling it tells me they want to sell but are afraid of leaving something on the table. I always advise taking profits when they are available. You are sitting on a very attractive gain which at this point is clouding your judgment. You can take your original investment out of play and leave your profits in the stock or you can take all your money off the table.

I have left money on the table more than once and never thought twice about it. It is a near impossibility to call an absolute bottom or an absolute top.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it to lschizas@globeandmail.com.

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