Page 497 - How to Make Money in Stocks Trilogy

How I Use IBD to Find Potential Winning Stocks 367

© 2009 Investor’s Business Daily, Inc.

When high technology was leading in the bull market of the 1990s, the
computer sector was number one for a year and a half. Stocks like Cisco and
Dell were constantly on the new-high list. If you knew what you were look-
ing for, and you understood the significance of a stock’s displaying new highs
in a bull market, maybe you too could have participated when these stocks
were going up 10 times or more. There’s a lot you can learn by studying past
markets. We are historians.
In other words, it’s hard not to notice the real action and the real leaders
in the market. They are as obvious as the elephant that jumps into the bath-
tub and splatters water all over the place. When a whole sector is moving,
the sheer volume and broad-based activity cannot be hidden. We saw this in
the energy sector from 2004 to 2007, when virtually all oil and gas stocks
were moving up dramatically.
At some point, all sectors change. And when they do, the 10 different
ways we have to pick up leaders and laggards will point you in a direction
where you can say, “Those stocks are no longer leading the way they did
before.” If you just go on emotions and your attachment to a stock, you can
get into a lot of trouble. You need precise measurements to tell you if this
sector or that security is really behaving properly.