Typically, stocks begin forming an uptrend after rising above their pivot point.  In the event the upward trend is violated, the stock will generally be expected to continue falling until it can retest support.  Initial support is usually the 50 DMA or its pivot point, whichever is higher, and important additional support levels include prior chart highs that were earlier resisitance levels - which normally act as important chart support levels.

Nordstrom Inc. (JWN -$0.95 or -2.36% to $39.30) gapped lower on about average volume on Tuesday. This stock was featured on Wednesday, July 28th, 2004 (read here) as it was emerging from a five-week base at $22.37 (split adjusted). Since then this stock has rallied an impressive +92% and is currently tracing a new base-on-base pattern.  On January 5th, 2006 this stock gapped out of a seven-month base on nearly 5 times normal trade! Since then, however, it had a bad gap down and loss on very heavy volume on February 24th.  It managed to find support in the neighborhood of prior chart highs in the $38 range (somewhat obscured by the datablock) but remains trading under its 50 DMA line and subject to the risk of further price deterioration.  The stock has been tracing out a base-on-base type of pattern, with the posibility of an eventual technical buy signal being created by a meaningful rise above resistance at prior chart highs in the $43 and accompanying above average volume.

Nordstrom's Inc.(JWN -1.30%) is a great example of applying an appropriate sell discipline.  CANSLIM.net members saw this issue featured in the Mid-Day BreakOuts Report as noteworthy and colored yellow on May 17th, 2005 (read here) at $28.24 (split adjusted).  This was right as it was breaking out of a "double bottom" base on above average volume, and it was within ten cents of its pivot point.  It had only one considerable correction as it raced up +34.42% to $37.96 in two and a half months. CANSLIM.net highlighted this issue several times during its ascent.  As is the case with most winners, there comes a time when technical signs are adding up to the notion that profits need to be realized.  

There is no rule against taking profits whenever you are up 20-25%, in fact, that is a range where some profit taking is encouraged.  In cases where your stock gains +20% in less than three weeks from your purchase it is considered a rule of CANSLIM purists that you must hold that stock for at least 8 weeks.  That rule wouldn't have applied in this case because it hadn't raced up.  One is generally better off selling on technical failures as opposed to fundamental weakness, as the charts have a tendency to indicate weakness in advance of any fundamental disappointments. 

What were some signs that it was time to sell JWN?  A close observer may have noticed that its up days in July lacked volume, giving signs that it was losing institutional conviction.  Later it failed to maintain trading above an upward trendline drawn connecting the lows on the chart over the prior 2-3 months.  Volume was light as it showed a rather negative reversal on August 1st.  Those were some of the more subtle clues, but its gap down action on the morning of August 4th was unmistakable as it flashed classic technical sell signals from several angles.  It failed to find support at prior chart lows, old chart resistance also failed to serve as support, and it abruptly sliced under and closed under its 50-day moving average line.  By this time it had broken several levels of support. Discipined investors would not be among those who may otherwise be wondering about what to do for the past five days.  They would be working to put their available funds to work in the next smart CANSLIM-based buy candidate of choice.  

Retail stocks have generally come under pressure in recent sessions, and as a result the share prices of many leading retailers have suffered.  Eventually JWN and other retailers could come back around and emerge again as buyable candidates, but in the interim the risk is too great that more price erosion may be in store.  Meanwhile, a fresh new breakout with great CANSLIM characteristics may likely be a better use for the sidelined cash resulting from a disciplined sale.