Page 1234 - How to Make Money in Stocks Trilogy

216 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

■ ✔ Make sure the stock bounces off the moving average line and
heads higher on heavy volume

You want the stock to rebound and show strength, not weakness, before
you buy. Never buy a stock as it’s moving down.

■ ✔ Buy as close to the moving average line as possible

As the stock bounces off the 50-day or 10-week moving average line, you
want to buy as close to that line as possible. The farther away from the line
you buy, the riskier it gets.

■ ✔ Focus on the first 2 pullbacks

The best gains typically come from the first 2 pullbacks to the 10-week
line. By the time a stock’s third or fourth retreat occurs, it likely has already
had a good move. Chances are now higher that the pullback is actually the
start of a more serious sell-off.
Study the following weekly and daily charts for Netflix. They show how a
pullback can be an opportunity to add shares to a winning position, or a sec-
ond chance to buy into a stock if you missed an earlier breakout.
That’s also a good reminder of why you want to continue to track winning
stocks as they make a big move. They’ll typically offer multiple opportuni-
ties for you to get in and profit.