Page 1049 - How to Make Money in Stocks Trilogy

36 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

Big Rock #1: Only Buy Stocks in a Market
Uptrend. Take Defensive Action as a
Downtrend Begins.

It’s no coincidence that the very first item on the Buying Checklist deals
with general market direction.
The reason is simple: A stock may earn stellar grades for the first six
®
CAN SLIM traits, but if the “M” (Market Direction) fails, look out!
We touched on this earlier, but we’ll come back to it again and again
because it’s critical that you understand this fact and take it to heart:

3 of 4 stocks simply move in the same direction as the general
market, either up or down.

How does that impact you?

• If you buy during a market uptrend, you have a 75% chance of being
right.
• If you buy during a market downtrend, you have a 75% chance of being
wrong.
I think you’ll agree: That’s a very compelling reason to stick with the
checklist and only buy stocks when the market is in an uptrend.
Of course, the question is: How can you tell which way the market is
trending right now?
Let’s find out using the checklist . . .

Buying Checklist

Big Rock #1: Only buy stocks in a market uptrend. Take defensive action as a
downtrend begins.
❏ Market in confirmed uptrend

■ ✔ Market in confirmed uptrend