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Your Stock Buying Checklist � A Review

step-by-step guide to finding stocks with the characteristics that make them market winners. This lesson reviews stock buying concepts presented in this course.  

Investor's Business Daily's Key Buy Rules

#6. What's The Market Telling You?

You may have found a great stock, but it will have a hard time climbing if the overall market is putting pressure on every stock. It's best to be in the market when the winds are favorable; don't fight the flow.

No one has a crystal ball, despite what some market analysts would like you to believe.

The most important thing you need to know is what the market is doing right now. Investor's Business Daily's General Market & Sectors page can help you understand the market's direction.

INTERPRETING THE MARKET INDEXES: It's important to watch price and volume movements in all the major indexes (Such as the S&P 500 and Nasdaq), to spot early signs of a possible drop in the market or an impending rebound. Combined with other market indicators shown, you get a comprehensive look at the market's health.

HELP FROM "THE BIG PICTURE": By reading about the market each day, you'll begin to spot trends and have an overall perspective that will materially help you with your investing decisions. "The Big Picture", found each day in IBD's General Markets & Sectors page, points out relevant trading activity. The visual referencing makes it easier to follow and understand what's driving the market. It will also help you spot new market trends. This play-by-play description will make clear most momentum-changing events.

Market page

#7. 'Star' Qualities

Most of history's winning stocks have been relatively new companies with innovative products or services.

  • Look for companies with groundbreaking products or services that hoist them to their industry's leadership.
  • Look for companies that have gone public within the last eight years.
  • Check into companies buying back 5% to 10% of their stock, and those with substantial ownership by management.

#8. Stock-Chart Analysis

Once you've identified a quality company, check its price and volume chart to spot the best time to buy and maximize your profits.

  • Buy stocks breaking out of proper chart base patterns, such as the cup with handle, double bottom and flat base.
  • Be sure to buy a stock within 5% of its pivot (buy) point. Otherwise, you could be buying a stock already too extended in price.
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