Page 336 - How to Make Money in Stocks Trilogy

212 A WINNING SYSTEM

ier volume than on the prior day. Astute CAN SLIM investors who had read,
studied, and prepared themselves by knowing exactly what to watch for had
long since taken their profits.
Study our chart examples of this and other market tops. History repeats
itself when it comes to the stock market; you’ll see this type of action again
and again in the future. So get with it.

Spotting the 2007 Top in the Market

As mentioned earlier, several surveys showed that approximately 60% of
IBD subscribers sold stock in 2008 before the rapid stock market break
occurred. IBD’s “The Big Picture” column clearly pointed out in its special
Market Pulse box when the market indexes had five distribution days and
the outlook had switched to “Market in correction,” and then the column
suggested that it was time to raise cash. I’m sure most of those people had
read and studied this chapter, including our description of how we retreated
from the market in March 2000. They were finally able to use and apply
IBD’s general market rules to preserve their gains and not have to undergo
the severe declines that can occur when you have no protective rules or
methods. And hopefully, those who didn’t follow the rules will be able to
better apply them in the future.
Not much happens by accident in the market. It takes effort on your part
to learn what you must know in order to spot each market top. Here’s what
Apple CEO Steve Jobs said about effort: “The things I’ve done in my life
have required a lot of years of work before they took off.” Annotated market
topping charts for the period from the 1976 top to the 2007 top start on page
214. Study them . . . if you want to survive and win.

Historical Tops for Further Study

Historically, intermediate-term distribution tops (those that are usually fol-
lowed by 8% to 12% declines in the general market averages) occur as they
did during the first week of August 1954. First, there was increased New
York Stock Exchange volume without further upward price progress on the
Dow Jones Industrials. That was followed the next day by heavy volume
without further price progress up and with a wide price spread from high to
low on the Dow. Another such top occurred in the first week of July 1955. It
was characterized by a price climax with a wide price spread from the day’s
low to its high, followed the next day by increased volume with the Dow
closing down in price, and then, three days later, increased NYSE volume
with the Dow again closing down.