SGP - sold

Sold my SGP (Supergroup) today, at a 942.23p (inc all transaction costs), for a profit of 70%. Not bad!

The reason I sold is not because I thought it was a bad company, or that I don’t think that the share price can go higher, but because I think it is overbought. In my momentum system, I’m selling when price to 50dSMA exceeds 25%. This was triggered this morning (thanks to Stockopedia’s alert system).

Also, take a look at Stockopedia’s chart for SGP. http://is.gd/cEwNdV

The share price has gone up 4 days in a row – so a pullback is not to be unexpected. The share price has also, to some extent, “gone parabolic” – another sign that it is overbought. It has also gone from around 675p in June to around 950p – an increase of around 40% in under 2 months.

I am still bullish of SGP, and would be very interested in getting back in if it moved back down closer to a support level. In the meantime, I’ll sit on the sidelines.

My momentum system isn’t perfect, of course. It sometimes gets you out of a share, and then tells you to get back in at a higher price. I would not claim that the system I’m developing is purely mechanical, either. It requires some human brainpower to determine if the system is giving false signals. I think that particular attention needs to be paid to the possibility that it flags shares as a buy, but momentum has broken down.

We shall see.