Page 709 - How to Make Money in Stocks Trilogy

14 HOW TO MAKE MONEY IN STOCKS SUCCESS STORIES

added to the first or second pullback to the 10-week moving average line on
low volume. The low volume shows that institutions are holding onto their
positions and not selling heavily.

Base Stages
As a stock is being bought and advances, it forms a series of bases, or areas of
price consolidations along the way. Very few stocks move straight up from their
first breakout. Most stocks stop and take a breather before moving higher.
We count these bases as first stage, second stage, third stage, and so on.
The reason we count base stages is because IBD market studies have shown
that earlier stage bases tend to be more successful than later stage bases. By
the time a stock has made a big move and is in a third, fourth, or even fifth
stage base, it’s too obvious, most institutions have made big money in the
stock and are ready to lock in profits and sell.
There are exceptions to the rule, and some stocks do continue to move
higher in later stage bases, but you want to put the odds in your favor.
Netflix is an example of a stock that formed a series of bases along its
move upward.
Look for stocks that are in earlier stage bases.

A Simple Routine for Putting It All Together

To Determine the Market Trend:

1. Check the Market Pulse found in The Big
Picture column of IBD to find the cur-
rent market trend.
2. Watch the Market Wrap video every day
to stay in touch with what happened in
the market as well as the action of leading
stocks at http://investors.com/IBDTV.