Page 1061 - How to Make Money in Stocks Trilogy

Buying Checklist 47

Find Out What Stage the Market is in with The Big Picture
If you regularly read The Big Picture column, you’ll always have a good sense
of where we’re at in the current market cycle—and what steps you should take
to handle it.

3. Always Stay Engaged—Even in a Down Market
One of the biggest mistakes you can make is to stop doing your routine and
ignore the market just because it’s currently in a correction.
Even in a severe market downtrend, we’re never more than four days
away from the start of a potential new rally. That’s all it takes for a follow-
through day to occur and switch the Market Pulse outlook from “Market in
correction” to “Confirmed uptrend.”
And as you’ll see in #5 below, if you don’t keep your watch list up to date
while the market is down, there’s a good chance you’ll miss the biggest
money-making opportunities in the next uptrend.
Think of a downtrend like the off-season in baseball. You’re not buying
stocks right now, but if you want to have stellar results when a new “season”
begins, you need to stick to your training regimen in the off-season. You
never want to be out of shape on “Opening Day” when that new uptrend
begins.

4. Look for New Leaders in a New Bull Market
In every bull market cycle, a new group of top-rated CAN SLIM stocks
emerges to lead the market higher. They’ll often double or triple in price in
just 1 to 2 years. Some will go up even more.
They’ll be the innovative leaders in whatever new inventions or industries
are driving that particular bull market. In the 1990s, it was the Internet rev-
olution and the rise of cell phones and personal computers that propelled
the market higher. No surprise, then, that it was the companies driving
those innovations—AOL, Qualcomm, Yahoo!, Amazon, Cisco, and others—
that became the big market winners.
But here are two other things you need to know about leading stocks:
• When leaders eventually peak and begin to decline, they drop 72% on
average.
• Only about 1 in 8 stocks that led in the prior bull market go on to lead
again in the next one.