It is time to take partial profits on 10 popular stocks listed later in this column. These are great companies with great products, excellent market shares, good balance sheets, and good earnings growth prospects. In addition to good fundamentals, from a traditional technical analysis perspective, all of these companies remain a buy for the long-term investor.

“If both fundamentals and technicals are good, why take partial profits,” is the question. The answer lies in a very important concept that most investors and analysts tend to ignore at their own peril. The concept can be best described by one word, “over-owned.”

In the simplest words, stocks go up when there are more buyers than sellers. What happens when almost everyone who is going to buy a stock has already bought it? The answer is simple: There is no fuel to propel the stock upward.

There are also two adjunct concepts that must be fully understood before an investor can apply the concept of over-owned in an investment decision. First, for the most part, medium- to large-cap stocks move on the buying and selling by institutions and not on the actions of retail traders.

Second, daytrading, high-frequency trading, actions of market makers and other short-term trading simply creates lots of noise, but does not materially change the trajectory of a stock. The underlying trajectory of a stock is determined by the strong hands willing to hold the stock for the medium to long term. …Read more at MarketWatch

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