Understanding incentives and narratives in the market is just as important as understanding its history; however, two truths remain constant through the test of time. People typically buy a stock to make a profit, but these same participants often hesitate to sell a stock just to realize those profits.
Selling can be due to a variety of reasons, such as exercising stock options, fulfilling tax purposes, or simply restructuring a portfolio once a stock has become too volatile. Therefore, seeing a large investor (or even a company insider) sell a stock doesn’t necessarily mean faith has been lost or that bad news is brewing.
