From Ask Bill O'Neil
"If a stock is 100% over its 200-day moving average, when would this be considered a valid sell signal?
As a general rule, some stocks may be sold when they are 70% to 100% or more above their 200-day moving average line. In this situation, however, the right time to sell depends a lot on the market environment. If you own a stock that is 100% or more above its 200-day (or even 50-day) moving average, you must ask yourself first and foremost: "Where are we in the bull cycle, and where is the stock within its pattern?" For example, if a stock breaks out of its first-stage base on huge volume and runs like mad for three weeks, then finds itself 150% above its 200-day moving average, this is viewed more as a sign of strength early in the move. Therefore, you would probably want to play this one out. If a stock has broken out of its third or fourth base and is also 150% above its 200-day moving average while the market has been in a bull move for nine months or more, it might be a good idea to consider booking some profits. Such rules should always be employed within the context of where you are in a stock's and the market's move. From late 1999 to March 2000, dozens of leading tech stocks went into climax runs, one of the most reliable topping signals. So selling at that time was the correct move. The current market is a lot different. Hundreds of quality stocks have broken out to new 52-week and all-time highs. But as always, continue to pay attention to the action of both the market and the leading stocks. Be on the lookout for the presence of additional sell signals.
Sometime back IBD had a article saying their studies of past leaders indicate that they tend to top on an average 110% above 200 day MA. So the sell above 100% of 200 day MA is not automatic rule, but when you see lot of stocks in a sector 100% above 200 day MA, most of the time, there is a high probability of correction. Shipping sector in October had this kind of action and also a churn at top of the range. A high volume churn at top of range is another topping signal IBD talks about a lot. So when a stock you are holding is 100% above 200 day MA, you need to move stops quickly to lock in profit and watch for other topping signals.
The best guide to when to sell is on IBD site:
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