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
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.
#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
- 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.