Page 1143 - How to Make Money in Stocks Trilogy

128 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

But it’s unlikely the stock will go straight up without some bumps along
the way. In fact, soon after a stock makes that initial jump, it may pull back
sharply as some investors take their short-term profits. If the stock is excep-
tionally strong, it will shake off that temporary setback and continue its
upward move.
The purpose of the 8-week rule is to help you sit through any sudden pull-
backs so you can hold on for potentially much larger profits. Without such a
rule, it’s easy to get scared out of the stock and sell too early.
See the following charts for 2 examples of how the 8-week rule can help
investors hold on for big gains.

Invensense – 2012 87% gain before sell-off Price
Weekly Chart Rises over 20% in 2 weeks: 19
Triggers 8-week hold rule 17
Explosive Growth in Quarter Before Breakout 15
- Earnings: 250% Breakout: Week 1 14
Buy point: 11.95 13
- Sales: 83% 8-week period 12
ends. Finds
Innovative Product support at 11
- Motion-tracking chips used in tablets, IPO Nov. 2011 benchmark 10
smartphones and other devices 10-week line 9
8
IPO base: Shorter than standard bases 7
6
8-week hold rule helps you sit through
volatile swing to capture bigger gain
Volume
3,000,000
1,400,000 © 2013 Investor’s Business Daily, Inc.
600,000
200,000
Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12
The 8-week hold rule helped investors sit tight
and grab a bigger chunk of Invensense’s 87% gain.