Selling Into Strength

Selling Into Strength

The act or practice of selling a security while the price is rising but when the seller expects the trend to reverse. This could result in a smaller profit but allows the seller to lock in profits before the reversal begins, which reduces the potential for loss. Selling into strength carries no risk for the seller, but it does come with the opportunity cost that the reversal will not take place and the seller will miss more profit. However, selling into strength may prevent a serious loss that comes from waiting until the reversal materializes.
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Selling Into Strength: WELL's increased disposition activity has reduced leverage, improved portfolio quality and demonstrated the increasing institutional acceptance of health care real estate.
"This means selling into strength and making incremental sales as the price goes up," he added.
We find that most investors are still anticipating a market correction in order to add to equity positions rather than actively selling into strength. This sentiment suggests that investors have simply missed a large portion of the rally that has now entered its fifth year.
"We are early in this rotation into cyclicals at the start of a new economic cycle in China, so some are still operating as in a bear market, selling into strength and clocking profits by rotating swiftly between sectors," Hong added.
The positive effect is likely to be shortlived and we would recommend selling into strength. However, we would not advise an outright short since there is too much uncertainty surrounding the potential buyback price and, clearly, too much politics (and little economics) involved, in our opinion.
And there has been a recent trend of selling into strength when the market hits a soft patch," said Chen Xin Yi, a commodities analyst at Barclays Capital in Singapore.
"Once again, we have seen retail investors timing equity purchases astutely, buying on weakness and selling into strength.
"There's obviously some rotation into the tech sector and everyone's looking at the agriculture space to see how that may affect things." There was evidence suggesting some investors were selling into strength with regional funds seeing net outflows of $63.3 million compared with the prior week's inflows, according to Citigroup.
The current positive effect on the share price is likely to be shortlived and we would recommend selling into strength. However, we would not advise an outright short since there is too much uncertainty over the details of the potential buyback.
We note that taking into account the very short term for price setting, the actual price for the buyout is difficult to predict, but we expect shareprice growth before the buyout and thus recommend selling into strength in this period.