How Playing It Safe Made Us 116% Last Week

The market took a big hit yesterday, and the media debate has already begun. Are the markets in the midst of some well-deserved profit taking? Or is this the beginning of yet another painful sell-off?

At this point, it's impossible to say for sure. We can only analyze the information the market gives us... 

State Street's Investor Confidence Index fell almost three points in March. However, this development isn't too surprising considering the broader market staged a white-hot comeback last month. It's understandable for any investor to take some gains off the table, especially with the pain of October-November 2008 still fresh in his mind…

Then there's the all-but stagnant IPO market…

Rosetta Stone was the first IPO to impress the market in almost a year. Rosetta Stone managed to sell more than six million shares at $18. That's the first time an IPO was priced above its range since Colfax in May 2008, according to the Wall Street Journal. And Rosetta was one of three IPOs to hit the market this month…

As you can see, these are a couple of bright spots. But we need to take this information with a grain of salt.

As we told our subscribers last week, now is the time for you to be proactive with your investments. Even though the market has moved in our favor, a gloomy sentiment remains.

The fact is we've been in the midst of the best rally since the 1930s (I'm sure no one failed to notice the negative feelings this particular decade brings). But there are plenty of unknowns that will need to shake out before we can truly be at ease with the markets and consider them back on track.

So for the time being, the Depression analogies will continue to ring out. Consider this: Between 1930-1932, investors experienced five rallies hat shot the market up 20% or more.

If nothing else, we should all learn a lesson from this interesting piece of history. When you're offered the opportunity to cash out with substantial gains in this market, take it.

As we have preached before, you might leave a couple of bucks on the table. But more importantly ― you are protecting your hard-earned profits.

We sold one overplayed pharma stock based on news-driven events last week for 255% gains. But we also took two other names off the table that we felt were reaching the end of their respective rallies. 

Darling International Inc. (NYSE: DAR) rallied almost all week. It gapped up two days in a row, posting nearly 40% gains in just a couple of days on no news. We were up 64% on the stock since we recommended it on March 20, so we sold into the rally. Dicks Sporting Goods (NYSE: DKS) was another strong name that rallied with the market. The stock pulled back a bit later in the week, so we sold to lock in 30% gains.

All told, these three plays locked in more than 116% in a single week.

Remember, it's not all about market timing. Could these stocks rise even more? Of course. But it's not real money until you book the profits. And in this volatile market, it's important to be smart about your trades.

When you're offered the opportunity to cash out with substantial gains, take it. Sure, you might leave a couple of bucks on the table…but when you get greedy and stay in a volatile game, you could end up losing the whole hand. Winning in this market is all about investing ― when you become a gambler, all bets are off