Page 1151 - How to Make Money in Stocks Trilogy

136 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

Hits new high, but reverses Index
Nasdaq Composite – 2007 on big volume 11/7/07 “Uptrend
under pressure”
Daily Chart 1
2 11/8/07 Market
Pulse shifts to 2800
How Mounting Distribution Days “Market in
correction”:
Warned Investors BEFORE Crash
Nasdaq drops
Selling pressure grew over several 3 54% over next
weeks, giving you time to take 16 months
defensive action before bear 2700
5
market began. 4 5th distribution
Sharp drop on big
volume. Closes at day in less than
bottom of range. 2 weeks
Back to back distribution 2600
days (2&3): Rising volume
shows increasing selling
© 2013 Investor’s Business Daily, Inc.
2 3 4 5
1 Volume (00)
14,000,000
8,000,000
4,000,000
2,000,000
10 24 7 21 5 19 2 16 30
August September October November
Regularly checking the distribution day count in the Market Pulse in The Big Picture
column will help you know when it's time to play defense and protect your gains.

What Action Should You Take as Distribution Days Mount?
First and foremost, make sure you’re following your selling game plan.
• Look for opportunities to lock in some profits. If you have a stock
that’s gone up 20%–25% from a buy point, why not cash in some or all of
those gains? If the number of distribution days continues to rise, there’s a
good chance your stocks will also get dragged down.
• Cut any losses short. Even in a strong market, if a stock drops 7%–8%
below what you paid for it, sell immediately. In a weakening market, you can
cut your losses even sooner—at, say, 3%–4%. Better to be safe than sorry.