5 Warning Signs Of Stock Decline

Basic knowledge of stocks and the stock market typically tells the retail investor there is no real indication of when a specific stock will start to decline. Contrary to this, however, savvy investors know this is actually not the case when looked at closely. It's all about reading the signs correctly. With this in mind, here are five major warning signs of stock decline everyone should pay attention to if they wish to be successful in the stock market.

Sales Slow Down

The basic principle of buyers and sellers applies to the purchase and sale of securities as well. If sales of a particular security slow down, expect a reduction in the price of the stock as well. Fewer buyers mean less competition overall, which in turn means sellers are more eager to sell. Both of these factors point to a decline in stock price.

Additionally, the sale of the product from the underlying company may slow down. This is completely natural for organizations, as they run on a fiscal year and spend money according to their quarterly budget. Therefore, if net sales are being reviewed, it is important to make the distinction between annual net sales (revenue) and monthly or quarterly numbers. Sales are, in many scenarios, seasonal and will fluctuate. However, if a company shows annual declining numbers and other contributing evaluations show the organization is weak in various areas, it may be time to take a loss.

Continue reading to learn about inter-company trading.

Inter-Company Trading

The individuals who know a company best are its executives and board members. If they start to sell, it is a pretty sure bet other investors will soon follow. Keep in mind insider selling can be completely innocuous, but it will still raise red flags in the marketplace. Keep up with the buying and selling patterns of the largest stakeholders in a stock anyway.

Insider sales are a matter of public record, and various websites keep up with the sales of stocks on the major stock exchanges from insiders. Take a look at one of them if you are wondering whether your favorite stock may be looking at a decrease soon. Insider sales may also serve as an indication one or more of the symptoms listed in this article are true as well.

Continue reading to dive into dividend cuts.

Dividend Cuts

Those who hold stocks for dividends usually comprise a substantial number of individuals who are in a stock at any given time. If dividends get cut, that stock becomes much less attractive to this audience, and as a result, they will probably sell. Even if many of them do not, enough of them may still start, which will definitely cause the price of the stock to begin to reduce. This may end up resulting in a chain reaction, so it is important to watch closely when making a decision.

Continue reading to learn about how industry problems may come into the equation next.

Industry Problems

Stocks may rise and fall due to factors beyond their control and the industry undergirding the stock may fall as a whole. A waning interest in the industry itself is highly likely to lead to the value of a stock falling since there is less demand. In most cases, a fall in the industry will coincide with some sort of internal issue with the underlying security, though it is crucial to note this is not always the case. As such, research and judge each scenario individually to be sure about the situation and the action (or inaction) called for.

Continue reading to reveal the influence political problems have in this situation.

Political Problems

Industry news isn't the only factor in a stock's potential decline. The wider political spectrum may also cause a stock to decline. For instance, political upheaval may create a more difficult environment in which to sell products, which will lower the ability of a business to create revenue for itself. Under these conditions, the stock may face a decline. Political problems can be big enough to outweigh any commercial insurance a business has for itself. It is, after all, the stability of the country underlying the business structure that makes an insurance policy valid in the first place.

Take a very close look at what the stock is going to do in the future if you see more than one of these symptoms. As with all investments, consult a qualified professional before committing to any action and understand all investments may lose money.