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154 HOW TO MAKE MONEY IN STOCKS SUCCESS STORIES

falling knife. Cisco ended up losing 85% of its value. IBD’s research shows
that former leaders correct 72% on average. That is why a buy and hold
strategy is very dangerous.

Dealing with a Prolonged Downtrend
The next three years were very difficult as the ensuing bear market wore on
from 2000–2003, although there were a few tradable rallies. A professional
trying to make money in the market found this a most challenging time.
Although Jim knew from looking at market history that things would get
better eventually, the prolonged bear almost wore him out. It was so bad
that people who worked in his office couldn’t wait till Friday. Watching the
market week by week was excruciating and often depressing.
About the time that Jim started to seriously worry that if things didn’t turn
around soon, he’d be “selling donuts at the local coffee shop,” the market
direction changed, and a new uptrend began. It really hit home to Jim that
it is often during the darkest hour that the market will bottom and begin to
turn up. Since then, he has welcomed bear markets, knowing they clear the
decks for new leadership and powerful bull markets. New winners are born,
and Jim knows he’ll be there to profit from their enormous moves.

New Up Trends Bring Exciting Leaders
In December 2003, he bought Research in Motion, the maker of the
Blackberry. Jim was excited about the stock because of the new technology.
People could leave their office and keep up with work and e-mails. The
stock’s earnings soared as a result. Research in Motion is a stock that Jim
would profit from a few years down the line also.
Jim bought Google in 2005. The company had the “big stock criteria” that
Jim always looks for: something completely new and innovative. Google’s
search engine would transform the way people searched for information on
the Internet.
Jim also saw something very unusual with Google’s up/down volume
ratio, which was 2.9. This ratio tracks the trading volume when a stock is ris-
ing in price and compares it to the volume when the stock is falling in price.
A ratio greater than 1.2 shows positive demand for a stock. At 2.9, the
demand for Google’s shares was off the charts. Jim had found while doing
research on the biggest winners from the past that they might have an
up/down ratio of 1.9 or higher, but 2.9 was the highest he had ever seen
(up/down volume can be found in Stock Checkup at Investors.com).