Page 513 - How to Make Money in Stocks Trilogy

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• C HAP T E R •

Watching the Market

and Reacting to News

Tape Reading Is Emotional

Ticker tape watching or being glued to your PC or watching the market on a TV
channel all day can get dangerously emotional. Sometimes a stock keeps rising
to the point where everyone—including you—is convinced it’s going “straight
through the roof.” That’s when discipline is most needed because the stock is
probably topping. When a stock’s merits are so obvious that it looks fantastic to
everyone, you can be sure almost everyone who can buy it has already done so.
Remember, majority opinion is rarely right in the stock market.
Winners in the stock market need perspective, discipline, and self-con-
trol above all else. Those who continually sit in front of the moving ticker
tape that shows many stocks as they change prices or their PC monitoring
hundreds of stocks changing prices risk making emotional decisions.

Is the Stock in a Base or Is It Too Extended?
There’s an easy way to keep your head if you’re keeping your eye on the tape
or on your PC.
When you see activity that impresses you, always refer to a weekly chart
to see if the stock is building a base or if it is extended too far past its buy or
pivot point. If it is extended, leave it alone; it’s too late. Chasing stocks, like
crime, doesn’t pay.
If the stock is building a base, then apply the CAN SLIM system. Are cur-
rent earnings up a meaningful amount? Is the three-year earnings record
good? Use IBD’s checklist for all the other CAN SLIM criteria.

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