Page 1218 - How to Make Money in Stocks Trilogy

Don’t Invest Blindly: Use Charts to See the Best Time to Buy and Sell 201

Warning Signs

When you see these signs of institutional selling or uncertainty in a cup-
with-handle or other pattern, proceed with caution. That base is less likely
to launch a big move and is more likely to fail.

• Too many down weeks on heavy volume

Buckle – 2009 Weakness: Too many weeks of base Price
spent under 10-week line 46
Weekly Chart Breakout fails 42
38
34
30
28
26
Lagging relative 24
strength line 22
19
17
15
14
More heavy-volume DOWN weeks than UP weeks: 13
Shows more distribution (selling) than accumulation (buying) 12
Volume
8,000,000
5,000,000 © 2013 Investor’s Business Daily, Inc.
3,000,000
1,800,000
Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09

• Gap downs on heavy volume

Buckle – 2009 Price 40
Daily Chart Breakout on below-average volume
shows lack of demand. Heavy-volume
selling kicks in a few days later.
35
Beware of Big Gap Down
Stock instantly drops to much lower
price on heaviest volume in months
30

25

Volume on gap down 502% higher
than normal. Shows selling is more
serious than you like to see in base. Volume 34% below avg. on breakout Volume
2,500,000 © 2013 Investor’s Business Daily, Inc.
1,200,000
600,000
300,000
1 15 29 12 26 10 24 7 21 4 18 2 16
May June July August September October