How to Make Money in Stocks Trilogy

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How to Make Money in Stocks: Complete Investing System © 2011 by William J. O’Neil
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How to Make Money in Stocks Getting Started: A Guide to Putting Can Slim ®
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Contents































Section I: How to Make Money in Stocks- Investng Systems enhanced eBook






























Section II: How to Make Money in Stocks Success Stories

Section III: How to Make Money in Stocks Getting Started



An Important Notice to All Investors




The American Association of Individual Investors conducted an
independent real time study of 50 top investment strategies every
month from January 1,1998 to December 31, 2009 and found
Investor's Business Daily's CAN SLIM* to be the top-performing
investment strategy.

In AAII's study, CAN SLIM produced a 2,763% result, an
average of 35.3% per year versus 3.3% a year for the S&P 500
during the same time period.







1
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How to




Make





Money in




Stocks











COMPLETE
INVESTING SYSTEM



WILLIAM J. O’NEIL


















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Started




Now!





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• CO NT E N TS •







Part I:
A Winning System: CAN SLIM ®

Introduction You Must Learn and Benefit from America’s
100 Years of Super Winners 3
CHAPTER 1 America’s Greatest Stock-Picking Secrets 9

CHAPTER 2 How to Read Charts Like a Pro and Improve
Your Selection and Timing 110

CHAPTER 3 C = Current Big or Accelerating Quarterly
Earnings and Sales per Share 152

CHAPTER 4 A = Annual Earnings Increases: Look for Big Growth 161

CHAPTER 5 N = Newer Companies, New Products, New Management,
New Highs Off Properly Formed Chart Bases 171

CHAPTER 6 S = Supply and Demand: Big Volume Demand at Key Points 180
CHAPTER 7 L = Leader or Laggard: Which Is Your Stock? 186
CHAPTER 8 I = Institutional Sponsorship 193

CHAPTER 9 M = Market Direction: How You Can Determine It 199

Part II:
Be Smart from the Start

CHAPTER 10 When You Must Sell and Cut Every Loss . . . Without Exception 239
CHAPTER 11 When to Sell and Take Your Worthwhile Profits 254

CHAPTER 12 Money Management: Should You Diversify,
Invest for the Long Haul, Use Margin, Sell Short,
or Buy Options, IPOs, Tax Shelters, Nasdaq Stocks,
Foreign Stocks, Bonds, or Other Assets? 273

CHAPTER 13 Twenty-One Costly Common Mistakes Investors Make 302



v

vi CONTENTS


Part III:
Investing Like a Professional

CHAPTER 14 More Models of Great Stock Market Winners 311

CHAPTER 15 Picking the Best Market Themes, Sectors, and Industry Groups 323
®
CHAPTER 16 How I Use IBD to Find Potential Winning Stocks 340
CHAPTER 17 Watching the Market and Reacting to News 382

CHAPTER 18 How You Could Make Your Million Owning Mutual Funds 393
CHAPTER 19 Institutional Portfolio Ideas 403

CHAPTER 20 Important Time-Tested Proven Rules and
Guidelines to Remember 424
BONUS
CHAPTER Test Your Knowledge 429
Success Stories 475

Index 489

I





• PART •











A Winning
A Winning




System:
System:





CAN SLIM ® ®
CAN SLIM

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• I N T RODUC T I ON •
You Must Learn and Benefit


from America’s 100 Years

of Super Winners


















After the market debacles of 2000 and 2008, investors now realize they must take
charge and learn much more about what they’re doing when they save and
invest their hard-earned money. However, many investors don’t know where
to turn, whom to trust, or what they must stop doing in order to achieve true
superior investment performance.
You don’t have to give your money to a Bernie Madoff, who’ll take it but
won’t tell you exactly what he’s doing with it. Instead, you need to read a
few of the best investment books, attend some investment classes, or par-
ticipate in an investment meet-up group so you can learn how to invest
with real knowledge and confidence. At the very least, you need to learn
and understand well the sound principles, proven rules and methods that
can protect and build your investment portfolio over time. Half of all
Americans save and invest; now it’s time to learn to do it intelligently with
critical know-how.
When I started investing, I made most of the same mistakes you’ve prob-
ably made. But here’s what I’ve learned:

• You buy stocks when they’re on the way up in price, not on the way down.
And when you buy more, you do it only after the stock has risen from
your purchase price, not after it has fallen below it.
• You buy stocks when they’re nearer to their highs for the year, not when
they’ve sunk lower and look cheap. You buy higher-priced, better quality
stocks rather than the lowest-priced stocks.


3

4 A WINNING SYSTEM


• You learn to always sell stocks quickly when you have a small 7 or 8% loss
rather than waiting and hoping they’ll come back. Many don’t.
• You pay far less attention to a company’s book value, dividends, or PE
ratio—which for the last 100 years have had little predictive value in spot-
ting America’s most successful companies—and focus instead on vital his-
torically proven factors such as strong earnings and sales growth, price
and volume action, and whether the company is the number one profit
leader in its field with a superior new product.
• You don’t subscribe to a bunch of market newsletters or advisory services,
and you don’t let yourself be influenced by recommendations from ana-
lysts, or friends who, after all, are just expressing personal opinions that
can frequently be wrong and prove costly.
• You also must acquaint yourself with daily, weekly, and monthly price and
volume charts—an invaluable tool the best professionals wouldn’t do
without but amateurs tend to dismiss as irrelevant.
• Lastly, you must use time-tested sell rules to tell you when to sell a stock
and take your worthwhile gains. Plus you’ll need buy and sell rules for when
it's best to enter the general market or sell and lower your percent invested.
Ninety percent of investors have neither of these essential elements.
All these wise actions are totally contrary to human nature! In reality, the
stock market is human nature and crowd psychology on daily display, plus
the age-old law of supply and demand at work. Because these two factors
remain the same over time, it is remarkable but true that chart patterns are
just the same today as they were 50 years ago or 100 years ago. Few
investors know or understand this. It can be your priceless advantage.
In this fourth edition of How to Make Money in Stocks, I’m showing you
right up front, in Chapter 1, 100 annotated color charts of 100 of America’s
greatest winning stocks, covering each decade from the 1880s to the end of
2008—from the Richmond and Danville Railroad in 1885 and Northern
Pacific during the famous corner of the stock in 1901, when it raced from
$115 to $700 in one week, to Apple and Google in our twenty-first century.
There is an enormous amount you will learn from studying these great
historical examples. You’ll see chart base patterns that are repeated year
after year with huge success. There are 105 examples (among the 100
stocks) of classic chart bases that look like cups with handles. Some are small
cups, others large, and others in between.
In addition to cups with handles, we’ve identified eight other distinctively
different, highly successful chart base patterns that occurred in cycle after
cycle. Bethlehem Steel in 1915 is our first powerful high, tight flag example
and served as a perfect historical precedent for later high, tight flag patterns

Introduction 5


such as Syntex, Rollins, Simmonds Precision, Yahoo!, and Taser. All of these
stocks had spellbinding price moves.
Charts plus earnings will help you tell the best stocks and general markets
from the weaker, riskier stocks and markets that you must avoid altogether.
That’s why I put all these outstanding chart examples in Chapter 1, with
notes marked on each chart to help you learn a skill that could just change
your whole life and let you live better and far smarter.
A good clear picture is worth a thousand words. These 100 examples are
just a small sample of what you’ve been missing for years. We have models
of more than 1,000 great stock market winners over the last 100 years. It
takes only one or two to make your year or your future. But you have to get
serious and work at really learning and knowing what you’re doing when you
invest. You can do it if you really want to and it’s important to you.
You’ll find this an exciting “common sense” new way of viewing America
and its stock market. From the railroad to the auto and the airplane, from the
radio and TV to computers, from jet airliners to space exploration, from mas-
sive discount stores to semiconductors and the Internet, this country has
shown rapid, unceasing growth. Living standards for the great majority of
Americans have improved materially from 100, 50, or even 30 years ago.
Yes, there will always be problems, and everyone likes to criticize. But
America’s innovators, entrepreneurs, and inventors have been a major dri-
ving force behind its unparalleled growth. They have created the new indus-
tries, new technologies, new products, new services, and 80% of the jobs
from which we all continually benefit.
Now it’s up to you to learn how to intelligently take advantage of the
relentless growth opportunities America’s freedom makes possible and that
entrepreneurs keep presenting for you during every business cycle.
In the following chapters, you will learn how to pick big winners in the
stock market and nail down the gains they produce. You will also learn how
to substantially reduce your mistakes and losses.
Many people who dabble in stocks either have mediocre results or lose
money because of their lack of knowledge. But no one has to continue to
lose money. You can definitely learn to invest wisely. This book will provide
you with the investment understanding, skills, and methods you need to
become a more successful investor, if you’re willing to work at it.
I believe most people in this country and throughout the free world,
whether young or old, regardless of their profession, education, back-
ground, or economic position, should learn to save and invest in common
stocks. This book isn’t written for the elite, but for the millions of ordinary
individuals everywhere who want a chance to be better off financially. You
are never too old or too young to start investing intelligently.

6 A WINNING SYSTEM


• YOU CAN START SMALL—If you’re a typical working person or a beginning
investor, you should know that it doesn’t take a lot of money to start. You can
begin with as little as $500 to $1,000 and add to it as you earn and save more
money. I began with the purchase of just five shares of Procter & Gamble
when I was only 21 and fresh out of school.

Mike Webster is one of our in-house managers who also started small. In
fact, Mike sold personal belongings, including his music CD collection, to
raise cash for investing. Prior to managing money for the firm, he had a gain
of over 1,000% in his personal account in 1999, a very unusual year.
Steve Birch, another of our in-house money managers, started manag-
ing money earlier. He took advantage of the roaring bull market of the
late 1990s and protected most of his gains by going mainly to cash in the
bear market. Between 1998 and 2003, he had gained over 1,300%. Both
Mike and Steve have had their rough years, but they’ve learned from
their many mistakes, which we all make, and have gone on to achieve sig-
nificant performance.
You live in a fantastic time of unlimited opportunity, an era of outstand-
ing new ideas, emerging industries, and new frontiers. However, you have to
read the rest of this book (probably two or three times) to learn how to rec-
ognize and take full advantage of these amazing new situations.
Opportunities are there for everyone. You are in a continually changing
and, hopefully, improving New America. We lead the world in high tech-
nology, the Internet, medical advancements, computer software, military
capability, and innovative new entrepreneurial companies. The commu-
nist/socialist system of a centralized “command economy” disintegrated on
the ash heap of history. It did not work. Stalin’s old Soviet Union killed 20
million of its own people. Our system of freedom and opportunity serves as
a model of success for most countries in the world.
Today it’s not enough for you to just work and earn a salary. To do the
things you want to do, go where you want to go, and have the things you
want to have in your life, you must save and invest intelligently. The income
from your investments and net gains you can make will, in time, let you
reach your goals and provide you real security. This book can change your
whole life. No one can hold you back but yourself. Think positive.

• SECRET TIP—The first step in learning how to pick big stock market winners
is to examine leaders of the past, like those you’re about to see, to learn all
the characteristics of the most successful stocks. From these observations,
you will be able to recognize the types of price and earnings patterns these
stocks developed just before their spectacular price advances.

Introduction 7


Key factors you’ll discover include what the quarterly earnings of these
companies were at the time, what the annual earnings histories of these
organizations had been in the prior three years, what amount of trading vol-
ume was present, what degree of relative strength there was in the prices of
the stocks before their enormous success, and how many shares of common
stock were outstanding in the capitalization of each company.
You’ll also learn many of the greatest winners had significant new prod-
ucts or new management, and many were tied to strong industry group
moves caused by important changes occurring in an entire industry.
It’s easy to conduct this type of practical, commonsense analysis of all past
successful leaders. I have already completed such a comprehensive study. In
our historical analysis, we selected the greatest winning stocks in the stock
market each year (in terms of percentage increase for the year), spanning
the past 125 years.
We call the study “The Model Book of Greatest Stock Market Winners.”
It’s been expanded recently to cover stocks dating back to the 1880s. It now
analyzes more than 1,000 of the biggest winning companies in recent mar-
ket history in detail, super stocks such as
Texas Instruments, whose price soared from $25 to $250 from January 1958
through May 1960
Xerox, which escalated from $160 to the equivalent of $1,340 between
March 1963 and June 1966
Syntex, which leaped from $100 to $570 in only six months during the last
half of 1963
Dome Petroleum and Prime Computer, which advanced 1,000% and
1,595%, respectively, in the 1978–1980 stock market
Limited Stores, which wildly excited lucky shareowners with a 3,500%
increase between 1982 and 1987
Cisco Systems, which between October 1990 and March 2000 advanced
from a split-adjusted $0.10 to $82
Home Depot and Microsoft both increased more than 20 times during
the 1980s and early 1990s. Home Depot was one of the all-time great per-
formers, jumping 20-fold in less than two years from its initial public offer-
ing in September 1981 and then climbing another 10 times from 1988 to
1992. All of these companies offered exciting new entrepreneurial products
and concepts. In total, we actually have 10 different model books that cover
America’s innovative and highly successful companies.
Would you like to know the common characteristics and rules of success
we discovered from this intensive study of all past stock market leaders?

8 A WINNING SYSTEM


They’re all covered in the next few chapters and in a simple, easy-to-
remember formula we have named CAN SLIM. Each letter in the words
CAN SLIM stands for one of the seven chief characteristics of these great-
est winning stocks at their early developing stages, just before they made
huge profits for their shareholders and our country (companies and employ-
ees all pay taxes as well as helping to improve our standard of living). Write
this formula down, and repeat it several times so you won’t forget it.
The reason CAN SLIM continues to work cycle after cycle and AAII’s 11-
year independent study, done in real time, rated it the top investment strat-
egy in America is it’s based 100% on realistic historical studies of how the
stock market has actually worked rather than on our personal opinion or
anyone else’s, including Wall Street’s . . . or academic theorists’. Further-
more, human nature at work in the market simply doesn’t change. So CAN
SLIM does not get outmoded as fads, fashions, and economic cycles come
and go. It will beat big egos, personal opinions, and emotions every time.
You can definitely learn how to pick winners in the stock market, and you
can become part owner of the best companies in the world. So, let’s get
started right now. Here’s a sneak preview of CAN SLIM:
C Current Quarterly Earnings and Sales: The Higher, the Better
A Annual Earnings Increases: Look for Significant Growth
N New Products, New Management, New Highs: Buying at the Right Time
S Supply and Demand: Shares Outstanding Plus Big Volume Demand
L Leader or Laggard: Which Is Your Stock?
I Institutional Sponsorship: Follow the Leaders
M Market Direction: How You Can Learn to Determine It

Please begin immediately with Chapter 1. Go for it. You can do it.

1







• C HAP T E R •



America’s Greatest

Stock-Picking Secrets














In this latest revised edition, you’ll observe 100 charts of the greatest winners
from 1880 to 2009. Study them carefully. You’ll discover secret insights into
how these companies set the stage for their spectacular price increases.
Don’t worry if you’re a new investor and don’t understand these charts at
first. After all, every successful investor was a beginner at some point—and
this book will show you how to spot key buying opportunities on the charts,
as well as critical signals that a stock should be sold. To succeed you need to
learn sound, historically proven buy rules plus sell rules.
As you study these charts you’ll see there are specific chart patterns that
are repeated over and over again whether in 1900 or 2000. This will give you
a huge advantage once you learn to, with practice, recognize these patterns
that in effect tell you when a stock is under professional accumulation.
It is the unique combination of your finding stocks with big increases in
sales, earnings and return on equity plus strong chart patterns revealing
institutional buying that together will materially improve your stock selec-
tion and timing. The best professionals use charts.
You too can learn this valuable skill.
This book is all about how America grows and you can too. The American
dream can be yours if you have the drive and desire and make up your mind
to never give up on yourself or America.








9

10
Price
340
300
260
400
Danville, Virginia in 1856. By 1890 it covered
Completed railroad route from Richmond to A WINNING SYSTEM 220 190 160 140 120 100 80 70 Buy 60 45 38 32 28 America’s first cup-with-handle chart base…a long one…74 weeks of price and volume action. 24 To count the weeks in a base, begin with the first week that closes down in price at
3,300 miles throughout the southern states.





A A Sep 1883 Jun 1883
Richmond & Danville–1885 Weekly Chart Price up weeks in black Price down weeks in red High, low and close plotted for each week Mar 1883 Dec 1882 Sep 1882 Jun 1882

10 A WINNING SYSTEM





Price 400 340 300 260 220 190 160 140 120 100 80 70 60 45 38 32 28 24 20 17 15 Volume 5,400 2,400 1,000 400 © 2009 Investor’s Business Daily, Inc.


Dec 1886

Sep 1886

Jun 1886

Mar 1886

Dec 1885

Sep 1885


Buy Jun 1885 Mar 1885 Dec 1884 Richmond & Danville increased 257% in 70 weeks.






Completed railroad route from Richmond to Danville, Virginia in 1856. By 1890 it covered 3,300 miles throughout the southern states. America’s first cup-with-handle chart base…a long one…74 weeks of price and volume action. To count the weeks in a base, begin with the first week that closes down in












A A Dec 1883 Sep 1883 Jun 1883
Richmond & Danville–1885 Weekly Chart Price up weeks in black Price down weeks in red High, low and close plotted for each week Mar 1883 Dec 1882 Sep 1882 Jun 1882

© 2009 Investor’s Business Daily, Inc.
50,000
30,000
80,000
Volume
18,000
14
12
10
8
Dec 1899
Sep 1899
Jun 1899
Mar 1899
Volume increase
closes at bottom)
Dec 1898
on breakout
Sep 1898
Tennessee Coal & Iron increased 265% in 39 weeks.
Jun 1898
Mar 1898
Mass-production of steel for The Spanish-American War. Price Lowered freight costs by using its own railroad and lowered 220 operating costs by employing convicts. 190 160 140 120 100 80 70 60 50 Buy 40 34 30 26 22 A classic shorter 16-week cup- 19 with-handle (note 4 weeks of tigh
Dec 1897
Sep 1897
Jun 1897
Mar 1897
Sep 1896 Dec 1896
Jun 1896 Mar 1896
trading volume for
Tennessee Coal & Iron–1898 Weekly Chart Weekly trading volume, color of volume matches color of price Average weekly prior 10 weeks Dec 1895 Sep 1895 Jun 1895

America’s Greatest Stock-Picking Secrets 11





Price 220 190 160 140 120 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 Volume 80,000 50,000 30,000 18,000 © 2009 Investor’s Business Daily, Inc.
Dec 1899

Sep 1899

Jun 1899

Mar 1899


Buy A classic shorter 16-week cup- with-handle (note 4 weeks of tight closes at bottom) Volume increase on breakout Dec 1898
Sep 1898

Jun 1898 Mar 1898


Mass-production of steel for The Spanish-American War. Lowered freight costs by using its own railroad and lowered operating costs by employing convicts. Dec 1897 Sep 1897 Jun 1897 Mar 1897 Tennessee Coal & Iron increased 265% in 39 weeks.















Sep 1896 Dec 1896

Jun 1896 Mar 1896
trading volume for
Tennessee Coal & Iron–1898 Weekly Chart Weekly trading volume, color of volume matches color of price Average weekly prior 10 weeks Dec 1895 Sep 1895 Jun 1895

12
Price
340
400
500
600
d, ,
contest for control of the railroad. At the end
.
James Hill and J.P . Morgan secured control.
mes Hill and J P Morgan secured control
o
Northern Pacific Corner 1901: a financial e
Northern Pacific Corner 1901: a financial
n
i
h
a
At
d
u
Dow Jones Ind.
e
r
1
n
9
r
e
o
t
o
o
J P
P
P
c
t
n
c
c
o
l
s
s
h
m
Jam
n
or
d
d A WINNING SYSTEM 300 260 90 220 190 Sell: climax top p Sell: climax top p p x m e 160 140 120 Add d 100 80 70 Buy Buy y 10-week cup- k k w 0 0 1 1 1 with-handle handle e n with- w 60 50 week 18-week e 18- 1 40 m m double bottom t e u d d 34 30 . Rel
Chartered as the first transcontinental railroa Chartered as the first transcontinental railroa a t t by Abraham Lincoln in 1864. Contributed 1 L b largely to the opening of the Northwestern N f th f i o th t l e l United States. Consumers all benefit. e e Northern Pacific double bott
a n r t th h e n e e 9 t 0 e o lt r Dec 1898
Northern Pacific–1900 Weekly Chart o u m 400%, Flightsafety in 1977 on page 56 i g o t 7 2 M h a n e b i a t e ’ll i Sep 1897 Jun 1897 Mar 1897 Dec 1896

12 A WINNING SYSTEM





Price 600 500 400 340 300 260 220 190 160 140 120 100 80 70 60 50 40 34 30 26 22 Volume 250,000 120,000 60,000 30,000 © 2009 Investor’s Business Daily, Inc.


Jun 1901

d, , i a h At . o n Sell: climax top p Sell: climax top p p x m e Add d 10-week cup- k k w 0 0 1 1 1 with-handle handle e n with- w Mar 1901 Dec 1900
Northern Pacific Corner 1901: a financial e Northern Pacific Corner 1901: a financial 1 9 e o c c contest for control of the railroad. At the end d r r t o t c o James Hill and J.P . Morgan secured control. mes Hill and J P Morgan secured control u e n o P P J P n l Dow Jones Ind









s
s
h
m
Jam
n
or
x. Mar 1900
. s a i c Dec 1899
Relative Price Strength Line vs. r e Dow Jones Industrial average. l i t s d I Uptrending line means stock is Uptrending line means stock is m d outperforming the market index h f Sep 1899 Jun 1899 Northern Pacific increased 1181% in 29 weeks.



d d 90 Jo D Mar 1899
Chartered as the first transcontinental railroa Chartered as the first transcontinental railroa a t t by Abraham Lincoln in 1864. Contributed 1 L b largely to the opening of the Northwestern N f th f i o th t l e l United States. Consumers all benefit. e e Northern Pacific double bott
a n r t th h e n e e 9 t 0 e o lt r Dec 1898













Northern Pacific–1900 Weekly Chart o u m 400%, Flightsafety in 1977 on page 56 i g o t 7 2 M h a n e b i a t e ’ll i Sep 1897 Jun 1897 Mar 1897 Dec 1896

© 2009 Investor’s Business Daily, Inc.
Volume
10,600
3,600
1,200
400
40
26
50
34
30
Dec 1916
Sep 1916
Jun 1916
Mar 1916
Can usually buy a market
t t
k
k
pulls back to its 10-week
leader the first 2 times it
mes it
Dec 1915
w
a
leader the first 2 time
moving average line
n
0
i
g
t
t t
u
Sep 1915
i
Bethlehem Steel increased 1479% in 99 weeks.
e
y
t
a
a
c
h
e
e
s
Jun 1915
a
pu
m
e
Mar 1915
Dec 1914
I
closed during
month base during WW
8-month base during WW
g
World War I I
an h r Price Dow Jones Ind. 700 600 Sell: climax top top o a l S S Market correction i ke 500 400 340 300 260 220 y Buy B 190 160 140 120 100 6-week high tight flag g g a high tight fla t i week h g k w 6 6 80 70 60 America’s Greatest Stock-Picking Secrets 13
World War
Buy
Bethlehem Steel produced about 60% of the t t Allies’ munitions during World War I. America W g steelmakers chose to stabilize profits for pr s c domestic contracts so foreign orders r n accounted for most of the profits. fits f th t t d fo Quarter by quarter plot of Quarter by quarter p
Market
d
e
d
Sep 1914
t
i
m
e
c
t
Sep 1913 Dec 1913 Jun 1913
Bethlehem Steel–1914 Weekly Chart Mar 1913 Dec 1912 Sep 1912
Price = 10*eps 242 80 70 60 50 45 40 36 32 30 28 26 24 22 20 18 16 15 14 13 12 11 10 9.00 8.00 7.00 6.00 5.00 4.50 4.00 3.60 3.20 3.00 2.80 2.60 2.40

America’s Greatest Stock-Picking Secrets 13





Price 700 600 500 400 340 300 260 220 190 160 140 120 100 80 70 60 50 40 34 30 26 Volume 10,600 3,600 1,200 400 © 2009 Investor’s Business Daily, Inc.


Dec 1916

Sep 1916

Dow Jones Ind. g g a Jun 1916 Mar 1916

6-week high tight flag high tight fla t i week h g k t t a mes it i t t k k w 0 t n Dec 1915




Sell: climax top top o a l w 6 6 Can usually buy a market u y a a leader the first 2 times it leader the first 2 time i h e e pulls back to its 10-week t c s moving average line g e a Sep 1915


S
S
Buy B
y e pu m Jun 1915
Mar 1915
i
an h r Market correction ke Buy I month base during WW 8-month base during WW Market e g closed during d World War I I World War d Dec 1914 Sep 1914 Bethlehem Steel increased 1479% in 99 weeks.
Bethlehem Steel produced about 60% of the t t Allies’ munitions during World War I. America W g steelmakers chose to stabilize profits for pr s c domestic contracts so foreign orders r n accounted for most of the profits. fits f th t t d fo Quarter by quarter plot of Quarter by quarter p









t
i
m
e
c
t
Sep 1913 Dec 1913 Jun 1913
Bethlehem Steel–1914 Weekly Chart Mar 1913 Dec 1912 Sep 1912









Price = 10*eps 242 80 70 60 50 45 40 36 32 30 28 26 24 22 20 18 16 15 14 13 12 11 10 9.00 8.00 7.00 6.00 5.00 4.50 4.00 3.60 3.20 3.00 2.80 2.60 2.40

14
Price
340
600
500
400
Dow Jones Ind.
Dow Jones turns up
Dow Jones turns up
p
GM breaks out as
into new uptrend
s
d
a
e
o
t
pt
p
u
e
k
e
r
M
o
t
rd
rd
s.
st
st
8-cylinder engine, a major development in high-speed engines
mega-corporation General Motors. In 1914, manufactured firs
corporation General Motors. In 1914, manufactured firs
standa
The auto outmodes the horse-and-buggy. Consumers’ standa
n
buggy. Consumers
Acquisitions turned Buick Motor Company into the A WINNING SYSTEM 300 260 220 ection Market correction t Market corre r c k 190 Add d 160 140 120 : 4 weeks in a n k e 4 Note: : t Buy u 100 tight price closes l c ic p ih g row t t w e Base B B 80 70 60 9 months in ba
Acquisitions turned Buick Motor Company into the
s
n
u
1
p
n
g
and
e
The auto outmodes the horse
e
o
M
G
a
d
s
e auto outmo
to outmo
of living rises.
of living rises
oou
o
g r
r
e
mega
Jun 1912 Sep 1912 Mar 1912
General Motors–1915 Weekly Chart Dec 1911 Sep 1911 Jun 1911

14 A WINNING SYSTEM





Price 600 500 400 340 300 260 220 190 160 140 120 100 80 70 60 50 40 34 30 26 22 Volume 9,000 5,600 3,400 2,000 Mar 1916 © 2009 Investor’s Business Daily, Inc.


: 4 weeks in a n k e 4 t tight price closes l c ic p ih g 117/100 Dec 1915



Dow Jones Ind. Add d Note: : row t t w e Base B B Big volume e lu v Bi B Sep 1915 Jun 1915



p a s d a m Mar 1915
GM breaks out as o k r Dow Jones turns up Dow Jones turns up t e into new uptrend e pt p u e Buy u 9 months in base e s ore buy point before buy point t o y Big volume at Big volume at o g buy point o y closed during g u World War I I ar Dec 1914

Market correction ection t Market corre r c k n m e befo f Market e a d o World Wa d o Sep 1914
M
o
t
Jun 1914


st st n s. s rd rd standa n buggy. Consumers u Mar 1914 Dec 1913 General Motors increased 471% in 39 weeks.


Acquisitions turned Buick Motor Company into the Acquisitions turned Buick Motor Company into the p o d corporation General Motors. In 1914, manufactured firs mega-corporation General Motors. In 1914, manufactured firs 1 M G 8-cylinder engine, a major development in high-speed engines n e a The








e auto outmo
of living rises.
of living rises
oou
o
r
g r
e
mega
Jun 1912 Sep 1912 Mar 1912
General Motors–1915 Weekly Chart Dec 1911 Sep 1911 Jun 1911

America’s Greatest Stock-Picking Secrets 15
Price
100
4.5
50
40
34
80
70
60
30
14
12
10
16
26
22
19
7
6
8
x.
outperforming the market index
x
Relative Price Strength Line vs.
.
Uptrending line means stock is
Relative Price Strength Line vs
Dow Jones Industrial average.
d
v
k
i
o
r
t
k
s
a
t
n
r
e
Dow Jones Ind.
h
u
t
S
c
i i
g
P
n
f
e
e
t
p
o
e
u
r
r
logarithmic chart plotted ove
goes above uptrend line on a
otted ove
v
3 “peaks” spread out over a
a
Sell on the way up if stock
Sell on the way up if stock
o
e
c
d
t
l
o
logarithmic chart plo
o
n
p
s
period of months
period of months
week moving
g
g
Add at 10-week moving
a
y
t
a
t
n
o
o
m
s
e
c
m
o
s
t
o
od o
o
k
o
o
average line
e
w
s
e
l line
a
0
pe
Add at 10
o
p
average l
S
g
S
3
S
p
g
Volume up 3.8 10/1 3/2 p olume up u Volume 65,000 30,000 12,200 5,600 2,600 Mar 1926 Dec 1925 Sep 1925 Jun 1925 Mar 1925 Dec 1924 Sep 1924 Jun 1924 Mar 1924 © 2009 Investor’s Business Daily, Inc. S.S. Kresge increased 836% in 154 weeks.
n e n n s 2 Market correction Market correction n n o t Buy - - - 22-week saucer- 22-week saucer- e with-handle h Dec 1923 Sep 1923
The mid-1920s was a transition period from The mid-1920s was a transition period from s w d mom-and-pop corner stores to business-owned e o n Kresge grew from 233 stores in retail chains. S.S. Kresge grew from 233 stores in r S S. retail chains h 1924 to 451 stores just 4 years later. r r e
o
S.S. Kresge–1923 Weekly Chart Earnings per share e a acceleration acceleration n c o 3/2 Jun 1922 Mar 1922 Dec 1921
Price = 20*eps 5.00 4.50 4.00 3.50 3.00 2.50 2.25 2.00 1.80 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.75 0.70 0.65 0.60 0.55 0.50 0.45 0.40 0.35 0.30 0.25 0.23 0.20 0.18

America’s Greatest Stock-Picking Secrets 15





Price 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 4.5 3.8 Volume 65,000 30,000 12,200 5,600 2,600 © 2009 Investor’s Business Daily, Inc.


10/1 Mar 1926
x.
. v r k o s x d i t k a Dec 1925

Dow Jones Ind. Relative Price Strength Line vs. Relative Price Strength Line vs t n S c P Dow Jones Industrial average. r u n Uptrending line means stock is e g outperforming the market index h t i i f Sep 1925 Jun 1925



r o r otted ove v d a e t e o e p e u 3/2 Mar 1925
Sell on the way up if stock Sell on the way up if stock p y t S S S goes above uptrend line on a l n t e o s g logarithmic chart plotted ove o logarithmic chart plo a c m a o 3 “peaks” spread out over a t o a s s 3 period of months period of months s t o m od o o o o o
c




average line
Add at 10
average l
g
Mar 1924 Jun 1924
p u
Volume up olume up S.S. Kresge increased 836% in 154 weeks.
n e n n s 2 r r Market correction Market correction n n o t Buy - - - 22-week saucer- 22-week saucer- e with-handle h Dec 1923 Sep 1923
The mid-1920s was a transition period from The mid-1920s was a transition period from s w d mom-and-pop corner stores to business-owned e o n Kresge grew from 233 stores in retail chains. S.S. Kresge grew from 233 stores in r S S. retail chains h 1924 to 451 stores just 4 years later. e e o
o












S.S. Kresge–1923 Weekly Chart Earnings per share e a acceleration acceleration n c o 3/2 Jun 1922 Mar 1922 Dec 1921








Price = 20*eps 5.00 4.50 4.00 3.50 3.00 2.50 2.25 2.00 1.80 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.75 0.70 0.65 0.60 0.55 0.50 0.45 0.40 0.35 0.30 0.25 0.23 0.20 0.18

16
A WINNING SYSTEM
Volume
14,000
30,000
2,000
6,000
Price
140
120
130
160
110
180
100
40
36
32
45
80
90
70
50
60
13
14
15
10
11
12
16
24
26
28
18
20
22
8
9
7
6
or
or
r
r
may pull back to its buy point o
may pull back to its buy point o
pull down 8% below your exact
pull down 8% below your exact
t t
Rarely will it eve
slightly below. Rarely will it eve
a breakout from a proper base
a breakout from a proper base
buy point if properly executed
Pullback: about half the time,
Pullback: about half the time
m
o
b
u
Sell: climax top
Sell: climax top
o
y
e
w
o
x
p
w
r
a
l
y
a
a
e
h
i
e
slightly below
w
k
%
o
o
p
l
Se
S
S
a
t
b
e
w
c
y
k
u
ay
g
y
l
a
s
Dow Jones Ind.
Big volume increase
e
e
n
on buy week
y we
e
e
m
Buy
Buy
u
y
g
n
ction
tio
ase
ase
week ba
54-week ba
Market correc
c
t
54
Mk
r
5
Mar 1923 Jun 1925 Mar 1925 Dec 1924 Sep 1924 Jun 1924 Mar 1924 Dec 1923 Sep 1923 Jun 1923 © 2009 Investor’s Business Daily, Inc. Utah Securities increased 538% in 63 weeks.
Dec 1922 Sep 1922
.
n
new public utilities industry was The new public utilities industry was s l growing rapidly as more homes and growing rapidly as more homes and m businesses were wired for electricity. l w The public’s living standard rises again. The public s living standard rises again r Jun 1922 Mar 1922
y
The s Dec 1921
Sep 1921
Utah Securities–1924 Mar 1921
Jun 1921
Weekly Chart Dec 1920

16 A WINNING SYSTEM





Price 180 160 140 130 120 110 100 90 80 70 60 50 45 40 36 32 28 26 24 22 20 18 16 15 14 13 12 11 10 9 8 7 6 Volume 30,000 14,000 6,000 2,000 © 2009 Investor’s Business Daily, Inc.

or b or o r r t t u Jun 1925
m
Sell: climax top Sell: climax top o a i l Se S S Pullback: about half the time, Pullback: about half the time e h o a a breakout from a proper base a breakout from a proper base p r a o t may pull back to its buy point o may pull back to its buy point o y k b Rarely will it eve

slightly below
k
c
u
y
ay
y
l
g
Sep 1924 Dec 1924
s
a
Dow Jones Ind. e e n Jun 1924
Buy Buy u Big volume increase m on buy week e y we e y Mar 1924
ction tio c ase ase
n g Dec 1923
Market correc t Mk r week ba 54-week ba 54 5 Sep 1923
Jun 1923

Mar 1923 Utah Securities increased 538% in 63 weeks.

Dec 1922 Sep 1922
.
n
new public utilities industry was The new public utilities industry was s l growing rapidly as more homes and growing rapidly as more homes and m businesses were wired for electricity. l w The public’s living standard rises again. The public s living standard rises again r Jun 1922 Mar 1922
y








The s Dec 1921
Sep 1921
Utah Securities–1924 Mar 1921



Jun 1921

Weekly Chart Dec 1920

© 2009 Investor’s Business Daily, Inc.
130,000
Volume
16,000
50,000
2,000
6,000
19
22
16
12
14
Dec 1929
Sep 1929
Jun 1929
Mar 1929
3/1
Dec 1928
Sep 1928
Du Pont de Nemours increased 1074% in 225 weeks.
Jun 1928
Mar 1928
Dec 1927
Sep 1927
A leader in science and technology across many Price g l h d t i c i d Ale industries including agriculture, film and automotive. industries including agriculture, film and automotive. u f r c 340 d Hybridization of seed corn in 1926 by Henry Wallace and r 2 o n b Dow Jones Ind. 300
Jun 1927
Mar 1927
Dec 1926
2/1
Sep 1926
Jun 1926
Du Pont de Nemours–1925 Weekly Chart Market correction c n n Market correction Market correction o e 3 weeks e tight closes tight closes tight closes t Sell: climax top o : Add Add 35-week double bottom- l w Buy handle with-handle with- Shakeout but Shakeout but u never 8% below

America’s Greatest Stock-Picking Secrets 17





Price 340 300 260 220 190 160 140 120 100 80 70 60 50 40 34 30 26 22 19 16 14 12 Volume 130,000 50,000 16,000 6,000 2,000 © 2009 Investor’s Business Daily, Inc.
Dec 1929

x.
. e L g e t x x n e Sep 1929
Dow Jones Ind. Relative Price Strength Line vs. t e S i e Dow Jones Industrial average. Dow Jones Industrial average t d s n Uptrending line means stock is m e g d outperforming the market index outperforming the market inde a e m o 3/1 Jun 1929 Mar 1929



climax top with w o climax to Sell: climax x x m m excessive 3/1 split ssive 3/1 split i 3 v 10-week moving v m e average line of prices s e o n e t e o e p e u Dec 1928 Sep 1928



exces
exces
exces
e
e
e
-
e
e
S
Jun 1928
Mar 1928
Dec 1927
d u r s. t hi a e t 3 weeks tight Handle drif ftsdown along weekly low prices along weekly low prices c p p y y k Sep 1927 Du Pont de Nemours increased 1074% in 225 weeks.
A leader in science and technology across many g l h d t i c i industries including agriculture, film and automotive. industries including agriculture, film and automotive. f r c Hybridization of seed corn in 1926 by Henry Wallace and 2 o n moisture-proof cellophane were 2 notable achievemen









d
t
Ale
b
i
Market correction n c 4 weeks tight closes g s at moving average line at moving average line n 3 weeks e Buy Buy tight closes tight closes tight closes t - 35-week double bottom- l w handle with-handle with- Shakeout but Shakeout but u never 8% below w % last buy point
o
Du Pont de Nemours–1925 Weekly Chart n n Market correction Market correction o e Sell: climax top o : Add Add Buy last buy 9 weeks k 9 9-week cup- week cup e 9 w in-a -row w w in-a -row with-handle up p p Volume up 13/10 Dec 1925 Sep 1925 Jun 1925 Mar 1925

18
Price
120
100
160
140
Sell: climax top with
Sell: climax top with
h
excessive 5/1 split
w
p
o
Dow Jones Ind.
Market top
p
a
Market top
t t
s
l
k
Mk
l
M
M
they introduced the “Burroughs Portable” that
they introduced the “Burroughs Portable” that
The largest manufacturer of adding machines A WINNING SYSTEM 80 70 60 Add: 3 tight weeks k e ht w h 3 ti Add A n after breakout and then n h n u k a 50 pulls back to 10-week e - k p y Buy B moving average line e g a v g m 40 Buy y B 34 30 e 8-week flat base a at
The largest manufacturer of adding machines
in the first half of the 20th century. In 1925,
1
b
a
weighed less than twenty pounds.
weighed less than twenty pounds
a
e
g
t
h
f
n
d
r
g
r
Burroughs Adding Machines–1926 Market correction n ti r t Mk M n n Earnings acceleration Earnings acceleration e n s begins s s beg Buy B n t e 44-week saucer-with-handle dl h ith h a k 44 4 Sep 1926 Jun 1926 Mar 1926 Dec 1925 Sep 1925
Price = 20*eps 8.00 Weekly Chart 7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.25 2.00 1.80 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.75 0.70 0.65 0.60 0.55 0.50 0.45 0.40 0.35 0.30

18 A WINNING SYSTEM





Price 160 140 120 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 Volume 30,000 14,000 6,000 2,000 © 2009 Investor’s Business Daily, Inc.
Depression begins, Depression begins n o e e stock falls from 98 f l l o to 29 in 5 weeks w 5 k week w 1 n n w e g g i i B io s 5/1 Dec 1929 Sep 1929


h
w
p
Market top Market top p t t k Mk M M Dow Jones Ind. Sell: climax top with Sell: climax top with o a l l excessive 5/1 split s Breaks below 10-week Breaks below 10 w b k r moving average and r a i m closes week below on closes week below on k w e o huge volume. Beginning m


8-week flat base e a at k tight closes e l l Dec 1928


y w ht h h
Buy B 8 8 8 ti t
6/5 Sep 1928
n k n h e - e e e o
Add: 3 tight weeks e ht w h 3 ti Add A after breakout and then n u k a pulls back to 10-week k p moving average line g a v g m Buy y B 22-week base k ba k w 22 Note: 3 weeks tight t w closes and tight price closes and tight price i n ut t spreads prior to b

The largest manufacturer of adding machines The largest manufacturer of adding machines a f g in the first half of the 20th century. In 1925, e t r they introduced the “Burroughs Portable” that they introduced the “Burroughs Portable” that g h r weighed less than twenty pounds. weighed less t
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Burroughs Adding Machines–1926 Market correction n ti r t Mk M n n Earnings acceleration Earnings acceleration e n s begins s s beg Buy B n t e 44-week saucer-with-handle dl h ith h a k 44 4 Sep 1926 Jun 1926 Mar 1926 Dec 1925 Sep 1925
















Price = 20*eps 8.00 Weekly Chart 7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.25 2.00 1.80 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.75 0.70 0.65 0.60 0.55 0.50 0.45 0.40 0.35 0.30

© 2009 Investor’s Business Daily, Inc.
Volume
14,200
4,200
7,800
2,200
32
17
24
20
28
Dec 1929
Note: 5 red weeks
ks
d week
Note: 5 red week
k
from prior week
with volume up
with volume up
e
u
fewer can bring themselves, af fter selling a stock at a loss,
s
e
and can’t bring themselves to cut every loss at 8%. Even
Sep 1929
m
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This is the difference between
to buy it back higher. This is the difference between
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5
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Jun 1929
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successful and unsuccessful investors.
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Mar 1929
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Dec 1928
lv
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International Business Machines increased 400% in 161 weeks.
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to buy it back higher
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Sep 1928
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IBM was expanding and developing new, successful products Price s u r s p a in the 1920s. In 1925, it released horizontal sorting machines in the 1920s. In 1925, it released horizontal sorting machines i a t d 5 500 with a speed of 360 cards per minute and the first standard r n s m c D
Jun 1928
u
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c
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o
a
Mar 1928
Dec 1927
s
s
should drift down along lows
stock wedged up along lows
over prior 12 weeks. Handle
over prior 12 weeks. Handle
Sep 1927
due to premature buying,
Sell: down 8% from cost
Sell: down 8% from cost
l
new industries and jobs.
new industries and jobs
m
a
b
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Jun 1927
was released
was released
s
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h
Verti
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Add Add Add 7-week base e 7 w r dd e tk o It o Mar 1927 Dec 1926
, a h h h a g b Buy y B 36-week cup-with-long-handle handle l long o with that finally corrects for wedging up along lows by shaking out. It up along lows by shaking out t h Volume picks up on shakeout p e Sep 1926 Jun 1926
Intl. Business Machines–1926 Market correction t Very important: after shakeout : i if stock comes back up through if stock comes back up through c 10-week line on even greater n e volume you must buy it back! u m week cup c 36 y l then goes up 400% p s g 3/1 6/5 Mar 1926 Dec 1925 S
n
Price = 20*eps Weekly Chart 20 18 16 15 14 13 12 11 10 9.00 8.00 7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.25 2.00 1.80 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80

America’s Greatest Stock-Picking Secrets 19





Price 500 400 340 300 260 220 190 160 140 120 100 80 70 60 45 38 32 28 24 20 17 Volume 14,200 7,800 4,200 2,200 © 2009 Investor’s Business Daily, Inc.

Depression n Depression D begins gi b rs rs o e t d o w v % s lo t n ks Note: 5 red weeks Note: 5 red week d week k e d 5 5 with volume up with volume up u m o from prior week e Dec 1929 Sep 1929




Dow Jones Ind. Sell: exhaustion gap Sell: exhaustion gap p t t a x l l Key: A successful investor learns to do what most investor Key: A successful investor learns to do what most investor o w t n e o are not willing to do. Psychologically, most investors don’t e n o a g o use chart








Buy Buy v s c y d t a t v s e g lv m h h g i e h h successful and unsuccessful investors. s c n d Dec 1928 Sep 1928
st B b b to buy it back higher a
s u r i a r n s o a o l w s K w n a use charts, r u ’ a a e fe t u o s c Jun 1928 Mar 1928
IBM was expanding and developing new, successful products s p a in the 1920s. In 1925, it released horizontal sorting machines in the 1920s. In 1925, it released horizontal sorting machines t d 5 with a speed of 360 cards per minute and the first standard m c duplicator. In 1928, it redesigned th








new industries and jobs.
new industries and jobs
was released
was released
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Intl. Business Machines–1926 Market correction t Very important: after shakeout : i if stock comes back up through if stock comes back up through c 10-week line on even greater g n e volume you must buy it back! u m 36-week cup-with-long-handle with week cup c 36 that finally corrects for
n
a
h
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Price = 20*eps Weekly Chart 20 18 16 15 14 13 12 11 10 9.00 8.00 7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.25 2.00 1.80 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80

20
Price
190
260
220
300
Dow Jones Ind.
Sell: climax top
o
a
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:
S
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Do Not Buy Here! Note this is a
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I.
manufacturing aircraft engines after World War I I
I
Most U.S. fighter planes used Wright engines in
fighter planes used Wright engines in
manufacturing aircraft engines after World War
the 1920s. The revolutionary a r cooled engine
the 1920s. The revolutionary air-cooled engine
Wa
s
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One of only three companies that continued A WINNING SYSTEM 160 3rd stage base. Seven weeks ago g ks w n S S b g t 3d 3 3 140 f fast run-up to 91 with stalling, up to 91 with stalling n t h ast run n closes barely up for week on n e w f b c y Buy y B 120 greater volume than
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debuted in 1927.
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debuted in 1927
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Most U S
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9
Dec 1925 Mar 1926 Sep 1925
Wright Aeronautical–1927 Weekly Chart Jun 1925 Mar 1925
Price = 20*eps 15 14 13 12 11 10 9.00 8.00 7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.25 2.00 1.80 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.75 0.70 0.65 0.60 0.55 Dec 1924

20 A WINNING SYSTEM





Price 300 260 220 190 160 140 120 100 80 70 60 45 38 32 28 24 20 17 15 13 11 Volume 80,000 50,000 30,000 18,000 © 2009 Investor’s Business Daily, Inc.


Mar 1929
ge o e e a Dec 1928
o
Dow Jones Ind. Buy as soon as stock s n s a B recovers back above a c s v e 10-week moving average g a n o k w line on volume. . m v o n Add af fter few weeks below w e k w w 10-week moving average a v g i o line as stock goes back line as stock goes back k b




Sell: climax top o a i : y Buy y B r d k e 10 0 t s n n e b e Breakout week u k k B B volume higher volume higher m o than prior week than prior week o h Mar 1928


S
S
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a t g ks w n t n e k k we io w g g Buy uy u k cup- cup- up u e dle 3 weeks 3 weeks k w 3 tight closes l h t e b e average volume u Dec 1927
Do Not Buy Here! Note this is a t ! 3rd stage base. Seven weeks ago n S S f fast run-up to 91 with stalling, up to 91 with stalling h closes barely up for week on w f greater volume than prior week. p th h Stock also wedges up along lows. Stock also wedges up along lows. p p e

I. n I Wa s h n o D b g t 3d 3 3 ast run n b c l t g a Big EPS turn Big volume on prior r o uptrend to base uptrend to base s n Jun 1927 Mar 1927 Wright Aeronautical increased 464% in 76 weeks.
One of only three companies that continued n e f manufacturing aircraft engines after World War I I manufacturing aircraft engines after World War g a f Most U.S. fighter planes used Wright engines in fighter planes used Wright engines in u e U the 1920s. The revolutionary air-cooled engine the








Most U S
9


Dec 1925 Mar 1926 Sep 1925
Wright Aeronautical–1927 Weekly Chart Jun 1925 Mar 1925












Price = 20*eps 15 14 13 12 11 10 9.00 8.00 7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.25 2.00 1.80 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.75 0.70 0.65 0.60 0.55 Dec 1924

© 2009 Investor’s Business Daily, Inc.
1,600,000
800,000
400,000
Volume
6
5
7
8
Jun 1929
plit
5 for 1 split
1
5/1
Mar 1929
5 f
e
Above average volume
Above average volume
e
m
and higher volume
Dec 1928
o
m
than prior week
than prior week
g
o
e
r
e
Sep 1928
a
g
pr
n
o
d
accelerating earnings
accelerating earnings
nings
A
Note two quarters of
a
g
o
g
t
Jun 1928
Huge volume
n
accelerating earn
e
m
e
e
a
n
q
n
g
Mar 1928
g
g
Radio Corporation of America increased 739% in 74 weeks.
w
u
e
e
c
t
c
a
a
Dec 1927
Big volume
Big volume
e
e
m
breakout
lat base
s
l
Sep 1927
fla
fla
Jun 1927
Radios gained in popularity during the 1920s Price 9 r p 140 from 5,000 in-home sets in 1920 to over 2.5 from 5 000 in home sets in 1920 to over 2 5 r 2 e Note: Once RCA, in the June e n A R c O Dow Jones Ind. 120 million by 1924. In 1926, through mergers million by 1924. In 1926, through
Mar 1927
Dec 1926
Sep 1926
entertainment.
s
m
n
B
m
0
y
a
p p p
y p Remember: examples of great winners are split-adjusted for all splits. Don’t fa e into trap of incorrectly thinking because buy point marked on RCA’s chart was a g 14, that was the real price at that time. It was really 5 times 14, or 70 since m all stocks in these 100 examples ha
l d k m r d l o Of the more than 1 000 models we have of 0 o y g hi l q y q o $ Jun 1926
Radio Corp. of America–1927 g m m n y r p a a a s c o w 1 M p p p p $30 range and Google was $113 s G a s yg yg yg y 0 $100 $30 up p fr b s $5, we avoid $3 o e m o Sep 1925 Jun 1925 Mar 1925
Price = 20*eps 6.50 Weekly Chart 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.25 2.00 1.80 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.75 0.70 0.65 0.60 0.55 0.50 0.45 0.40 0.35 0.30 0.25 0.23

America’s Greatest Stock-Picking Secrets 21





Price 140 120 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 5 Volume 1,600,000 800,000 400,000 © 2009 Investor’s Business Daily, Inc.

y d plit Jun 1929
Shakeout: but barely u k closes week down and o e w e closes at top area for closes at top area for a o a e the week e w e e m 5 for 1 split 1 5 f 5/1 Mar 1929


Dow Jones Ind. A w w it now o Buy off 19-week k week e 9 Buy off 19 f u base s l l h o Shakeout of buyers who w ye b o o were wrong in buying n u n n w from 3rd stage base from 3rd stage base e a g s 3 breakout to new high. h h n t o o e nings g g n m Ab






Note: Once RCA, in the June e n A R c O & September 1928 quarter, & September 1928 quarter e 9 e m t undercuts the low price of point A o f c p o h s c and completes a new base, it now t e and completes a new base b e a t p o becomes a 1st stage base. b g g g s 1 m Do









Radios gained in popularity during the 1920s 9 r p from 5,000 in-home sets in 1920 to over 2.5 from 5 000 in home sets in 1920 to over 2 5 r 2 e million by 1924. In 1926, through mergers million by 1924. In 1926, through mergers e 1 and acquisitions with RCA’s own network, the k w h National B







entertainment.
s
m
n
m
0
a
B
y
y p Remember: examples of great winners are split-adjusted for all splits. Don’t fa e into trap of incorrectly thinking because buy point marked on RCA’s chart was a g 14, that was the real price at that time. It was really 5 times 14, or 70 since m all stocks in these 100 examples ha
l d k m r l o Of the more than 1 000 models we have of 0 o y g hi l q y q o $ Jun 1926
p d p p
Radio Corp. of America–1927 g m m n y r p a a a s c o w 1 M p p p p $30 range and Google was $113 s G a s yg yg yg y 0 $100 $30 up p fr b s $5, we avoid $3 o e m o Sep 1925 Jun 1925 Mar 1925









Price = 20*eps 6.50 Weekly Chart 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.25 2.00 1.80 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.75 0.70 0.65 0.60 0.55 0.50 0.45 0.40 0.35 0.30 0.25 0.23