Page 273 - How to Make Money in Stocks Trilogy

How to Read Charts Like a Pro and Improve Your Selection and Timing 151

To summarize, dramatically improve your stock selection and overall
portfolio performance by learning to read and use charts. They provide a
gold mine of information. It will take some time and study on your part to
become good at this, but it’s an invaluable skill you can learn. You may have
to re-read this chapter several times in the first year or two if you really want
to be good at chart reading. The big secret is for you to combine skillful
chart reading with stocks that have outstanding earnings and sales growth,
plus superior returns on equity or pre-tax profit margins. You need both
fundamentals and chart reading, not just one or the other.

• A Loud Warning to the Wise about Bear Markets!!!

Let me offer one last bit of judicious guidance. If you are new to the stock mar-
ket or the historically tested and proven strategies outlined in this book, or,
more importantly, if you are reading this book for the first time near the begin-
ning or middle of a bear market, do not expect the presumed buy patterns to
work. Most of them will definitely be defective. You absolutely do not buy break-
outs during a bear market. Most of them will fail.
The price patterns will be too deep, wide, and loose in appearance com-
pared to earlier patterns. They will be third- and fourth-stage bases; have
wedging or loose, sloppy handles; have handles in the lower half of the base;
or show narrow “V” formations moving straight up from the bottom of a base
into new highs, without any handle forming. Some patterns may show laggard
stocks with declining relative strength lines and price patterns with too much
adverse volume activity or every week’s price spread wide.
It isn’t that bases, breakouts, or the method isn’t working anymore; it’s that
the timing and the stocks are simply all wrong. The price and volume patterns
are phony, faulty, and unsound. The general market is turning negative. It is
selling time. Be patient, keep studying, and be 100% prepared. Later, at the
least expected time, when all the news is terrible, winter will ultimately pass
and a great new bull market will suddenly spring to life. The practical tech-
niques and proven disciplines discussed here should work for you for many,
many future economic cycles. So get prepared and do your homework. Create
your own buy and sell rules that you will constantly use.