Page 389 - How to Make Money in Stocks Trilogy

264 BE SMART FROM THE START

1999, it could be 100%. Stocks tend to top around excessive stock
splits. If a stock’s price is extended from its base and a stock split is
announced, in many cases the stock could be sold.
7. Increase in consecutive down days. For most stocks, the number of
consecutive down days in price relative to up days in price will proba-
bly increase when the stock starts down from its top. You may see four
or five days down, followed by two or three days up, whereas before
you would have seen four days up and then two or three down.
8. Upper channel line. You should sell if a stock goes through its upper
channel line after a huge run-up. (On a stock chart, channel lines are
somewhat parallel lines drawn by connecting the lows of the price pat-
tern with one straight line and then connecting three high points made
over the past four to five months with another straight line.) Studies
show that stocks that surge above their properly drawn upper channel
lines should be sold.
9. 200-day moving average line. Some stocks may be sold when they
are 70% to 100% or more above their 200-day moving average price
line, although I have rarely used this one.
10. Selling on the way down from the top. If you didn’t sell early while
the stock was still advancing, sell on the way down from the peak. After
the first breakdown, some stocks may pull back up in price once.

Price
Bethlehem Steel 600
Sell: climax toppxl: clim p
Weekly Chart 500
400
340
300
St
Stock downdownk do 260
Stock
30% in 3 weeks
Buy pointpointpoint
B
Buy 30% in 3 weeksin 30 220
190
160
140
120
Hi
Higig igh tightgh tighttightgg t t 100
laga fla fla g
80
70
60
Volume © 2009 Investor’s Business Daily, Inc.
30,000
14,000
6,000
2,000
Sep 1914 Dec 1914 Mar 1915 Jun 1915 Sep 1915 Dec 1915 Mar 1916