Page 1178 - How to Make Money in Stocks Trilogy

Don’t Invest Blindly: Use Charts to See the Best Time to Buy and Sell 161

You want to buy a stock when it’s showing strength, not weakness.
“Strength” means the stock is trending higher and finding support at key
moments—both signs that institutional investors are buying shares.
Look at the example of a downtrend. Does that look like strength or
weakness? How much lower will that stock go before it finds an area of sup-
port (a “floor”) and starts coming back up? Will it ever come back up? No
one knows! It might start a big run tomorrow; it might keep going lower.
That’s the point: Why take on all that risk and uncertainty when you
don’t have to?
Don’t get suckered into “bargain hunting” for beaten down stocks that
are on the decline. Remember what we learned earlier: Stocks hitting new
lows tend to go lower. Stocks hitting new highs tend to go higher.
So only buy stocks that are already showing strength and moving in the
right direction—up!