Page 272 - How to Make Money in Stocks Trilogy

150 A WINNING SYSTEM

At Home Price
120
Weekly Chart 100
Ovev rheaddhead d d d 80
pp
supplyu pp yyyy 70
60
50
40
34
30
26
22
19
16
14
2/1 12
Volume
30,000,000 © 2009 Investor’s Business Daily, Inc.
16,000,000
8,000,000
4,000,000
2,000,000
Sep 1998 Dec 1998 Mar 1999 Jun 1999 Sep 1999 Dec 1999 Mar 2000
buying a stock that has a large amount of recent overhead supply. This is a
serious mistake that many analysts who are concerned solely with funda-
mentals sometimes make.
A stock that’s able to fight its way through its overhead supply, however,
may be safer to buy, even though the price is a little higher. It has proved to
have sufficient demand to absorb the supply and move past its level of resis-
tance. Supply areas more than two years old create less resistance. Of
course, a stock that has just broken out into new high ground for the first
time has no overhead supply to contend with, which adds to its appeal.

Excellent Opportunities in Unfamiliar, Newer Stocks
Alert investors should have a way of keeping track of all new stock issues that
have emerged over the last 10 to 15 years. This is important because some of
these newer and younger companies will be among the most stunning perform-
ers of the next year or two. Most of these issues trade on the Nasdaq market.
Some new issues move up a small amount and then retreat to new price
lows during a bear market, making a poor initial impression. But when the
next bull market begins, a few of these forgotten newcomers will sneak back
up unnoticed, form base patterns, and suddenly take off and double or triple
in price if they have earnings and sales that are good and improving.
Most investors miss these outstanding price moves because they occur in
new names that are largely unknown to most people. A charting service can
help you spot these unfamiliar, newer companies, but make sure that your
service follows a large number of stocks (not just one or two thousand).
Successful, young growth stocks tend to enjoy their fastest earnings
growth between their fifth and tenth years in business, so keep an eye on
them during their early growth periods.