Page 904 - How to Make Money in Stocks Trilogy

158 HOW TO MAKE MONEY IN STOCKS SUCCESS STORIES

tional money was accumulating shares. He also noted that the RS line (rel-
ative strength line) was heading into new high ground, something that is
often seen in the biggest market leaders. This meant that Baidu was outper-
forming the S&P 500. Subsequently, on March 12, 2009, the general market
began a new uptrend. With the market acting well, Jim reestablished a posi-
tion in Baidu.
On October 26, 2009, Baidu announced that it was going to change to an
advertising platform called Phoenix Nest. The stock sold off heavily on the
news because analysts thought earnings were going to be affected by the
switch to a different platform. The next day, the stock gapped down 18%
and fell below the 50-day moving average. Jim owned a large number of
shares and was down several million dollars in his account. He sold a size-
able amount of his position down to the “being able to sleep at night level”
and waited to see how Baidu would do in the following weeks.
Baidu traded sideways for 10 weeks but bounced off the 50-day line with
heavy volume. Baidu said that the Phoenix platform would solve problems
they were having with advertisers, which turned out to be good news.
Institutional money went back into Baidu, and so did Jim Roppel.

Watch for Excessive Stock Splits
Baidu had a 10-for-1 stock split in June 2010. Jim reduced his position,
knowing that oversize splits can sometimes make a company more lethargic
by creating a substantially larger number of shares. He sold another part of
his position as the stock broke the 50-day line in June and the final portion
in June 2011 after the stock again pulled below the 50-day line. Jim has a sell
rule that if a stock has a severe break of the 50-day moving average on heavy
volume after a long run, then it must be sold.
Jim ended up making just under $30 million with his trades in Baidu. This
illustrates the importance of handling a big winner correctly once you find
it. Many people might discover a winning stock but end up selling it too
soon or make the mistake of not going back into the stock after being shaken
out of it. But this is necessary if you’re going to capture the market’s biggest
leaders. And these stocks are the ones that can really change your life if you
handle them correctly.

Sitting on His Hands with a Leading Stock
Jim’s overall strategy is to hold a stock for a year, though this isn’t cast in
stone. He knows that a big winner may have four pullbacks to the 50-day