Page 954 - How to Make Money in Stocks Trilogy

Appendix B 203

Chris: One very important rule to follow is the 8-week holding rule. When
a stock breaks out and runs up more than 20% in less than 3 weeks, you
need to hold that stock for a full 8 weeks before you make a longer-term
decision. The power of the rule is that it helps you sit through short-term
shakeouts and go for much larger gains.
The majority of stocks, however, won’t trigger that rule; they may go
up 25% in 5 or 6 weeks. If you take your profits at that point, you’ll have
banked real money and then you can reinvest it in a new breakout. And
the stock that you just sold in many cases will build another base over the
following weeks or months and then give you another opportunity. You’re
compounding your profits. The reason this works so well is the fact that
many growth stocks typically run up 20 to 25% and then consolidate and
form another base.
Amy: Where can you find these stocks in IBD?
Chris: Investor’s Business Daily is loaded with new stock ideas every day.
There are two features every investor should monitor all the time. The
first is the IBD 50, which is published Mondays and Wednesdays. We
screen for the best stocks with strong fundamentals and excellent price
performance. There’s a mini chart with each stock along with a descrip-
tion of its base pattern, and whether it is near a buy point. These quick
descriptions are how many investors hone their chart reading skills.
Another great way to find stocks is to review the names at the top of
each sector in the Research Tables. These Sector Leaders come from our
most demanding screen and are the result of years of research into what
makes a top-tier leading stock. Very few stocks can meet all the criteria to
become a Sector Leader, so those that make this list should definitely be
on everyone’s watch list. Analyze their chart patterns and read as many
archived stories as you can. Most of the biggest leaders stay on the Sector
Leader list during prolonged market uptrends.
Amy: Can a newer investor or someone who is short on time succeed with
these features?
Chris: Doing exceptionally well in any field takes some work, but IBD has a
lot of resources to make it easier for investors. We have hundreds of
Meetup Groups across the country where IBD readers gather each month
to share ideas, use our market courses created for these groups, and help
each other understand how the stock market works. We also introduced a
new service in 2011 called Leaderboard. I think of Leaderboard as real-