When a stock price jump is a sign to sell

June 20, 2008

My shares in a technology stock have hovered near $7 per share for two years, but last week the price shot up to $12. I can't find any significant news to explain the jump, only some online chatter that one of the company's products could be marketed as an iPhone accessory. Should I sell my shares or wait to see whether this price rise is finally the start of a growth spurt?

My shares in a technology stock have hovered near $7 per share for two years, but last week the price shot up to $12. I can't find any significant news to explain the jump, only some online chatter that one of the company's products could be marketed as an iPhone accessory. Should I sell my shares or wait to see whether this price rise is finally the start of a growth spurt?

Unless you have evidence that the company has a significant new opportunity and is in a better position to pursue it than its competitors would be, it's probably best to sell your shares and grab the profit while you can. A price rise based primarily on unsubstantiated investor excitement is apt to prove fleeting. If you're tempted to gamble on the stock, consider doing so with, say, a third or half of your shares and selling the rest. That way you'll collect at least some of the profits and free up cash for a more promising investment opportunity.