How to Make Money in Stocks Trilogy

Test Your Knowledge 449


© 2009 Investor’s Business Daily, Inc.
Price 140 120 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 4.5 Volume 8,000,000 5,000,000 3,000,000 1,800,000


S&P 500 Dec 2004



Sep 2004


Jun 2004



Mar 2004



Dec 2003


Sep 2003



Jun 2003



Mar 2003



Dec 2002 Sep 2002

Identify the base in the box Jun 2002 Mar 2002

450 Bonus Chapter
Volume
3,000,000
8,000,000
1,800,000
5,000,000
Price
100
140
160
190
120
30
10
26
16
14
19
12
22
34
80
50
60
40
70
8
7
S&P 500
g
Confi irming
n
RS line
RS line
n
R
C
e
Cup with handle
d
Buy point t
in
p w
y
B
B
B
Jun 2004 Sep 2005 Jun 2005 Mar 2005 Dec 2004 Sep 2004 © 2009 Investor’s Business Daily, Inc.
Mar 2004
Dec 2003
Sep 2003 Jun 2003
Abercrombie & Fitch–2004 Weekly Chart Mar 2003 Dec 2002

450 Bonus Chapter © 2009 Investor’s Business Daily, Inc.




Price 190 160 140 120 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 Volume 8,000,000 5,000,000 3,000,000 1,800,000


S&P 500 Sep 2005



Jun 2005


Confi irming g n C RS line RS line n R Mar 2005




Dec 2004
e d
Buy point t in y B B B Cup with handle p w Sep 2004



Jun 2004



Mar 2004



Dec 2003


Sep 2003 Jun 2003



Abercrombie & Fitch–2004 Weekly Chart Mar 2003 Dec 2002

Test Your Knowledge
800,000
Volume
400,000
200,000
1,600,000
Price
100
4.5
3.6
14
16
10
12
50
60
34
80
40
22
19
26
70
30
7
8
6
S&P 500
3/2
Sep 1989 Mar 1991 Dec 1990 Sep 1990 Jun 1990 Mar 1990 Dec 1989 © 2009 Investor’s Business Daily, Inc. 451
3/2
Jun 1989
Mar 1989 Dec 1988
Would you buy this stock? Sep 1988 Jun 1988

Test Your Knowledge 451


© 2009 Investor’s Business Daily, Inc.
Price 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 4.5 3.6 Volume 1,600,000 800,000 400,000 200,000


S&P 500 Mar 1991


Dec 1990



Sep 1990
3/2

Jun 1990


Mar 1990



Dec 1989



Sep 1989
3/2

Jun 1989


Mar 1989 Dec 1988


Would you buy this stock? Sep 1988 Jun 1988

452 Bonus Chapter
Volume
5,000,000
8,000,000
3,000,000
1,800,000
Price
100
120
4.0
16
19
14
10
12
22
50
40
60
80
70
34
30
26
7
8
6
5
S&P 500
4/3
3/2
Dec 1991 Jun 1993 Mar 1993 Dec 1992 Sep 1992 Jun 1992 Mar 1992 © 2009 Investor’s Business Daily, Inc.
Sep 1991
3/2
sal at sal at sa i l
s s Yes Ye Y Y Y Y stock? s Positive reversal at e e e Positiv bottom of handle han m Downward sloping d n D handle handle l RS line moving to g new high ahead of new high ahead of a stockprice Jun 1991 Mar 1991
Home Depot–1991 Weekly Chart Would you buy this stock? Yes this buy u you Would d Cup with handle e p d Prior uptrend n Buy point B ll Supporting weeks (all ( k tin S close 40% or higher in % week’s trading range) ) di r k’ p Volume up 3/2 Dec 1990 Sep 1990

452 Bonus Chapter © 2009 Investor’s Business Daily, Inc.




Price 120 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 5 4.0 Volume 8,000,000 5,000,000 3,000,000 1,800,000


S&P 500 4/3 Jun 1993


Mar 1993



Dec 1992



Sep 1992
3/2

Jun 1992


Mar 1992



Dec 1991



Sep 1991
3/2
sal at sal at sa i l

s s Yes Ye Y Y Y Y stock? s Positive reversal at e e e Positiv bottom of handle han m Downward sloping d n D handle handle l RS line moving to g new high ahead of new high ahead of a stockprice Jun 1991 Mar 1991






Home Depot–1991 Weekly Chart Would you buy this stock? Yes this buy u you Would d Cup with handle e p d Prior uptrend n Buy point B ll Supporting weeks (all ( k tin S close 40% or higher in % week’s trading range) ) di r k’ p Volume up 3/2 Dec 1990 Sep 1990

Test Your Knowledge
340,000
580,000
200,000
Volume
1,000,000
1,700,000
Price
4.5
2.8
2.4
3.8
3.2
10
34
30
40
60
50
26
14
12
16
22
19
7
8
6
S&P 500
1/2
Mar 2003 Sep 2004 Jun 2004 Mar 2004 Dec 2003 Sep 2003 Jun 2003 © 2009 Investor’s Business Daily, Inc. 453
Dec 2002
Sep 2002 Jun 2002
Would you buy this stock? Mar 2002 Dec 2001

Test Your Knowledge 453


© 2009 Investor’s Business Daily, Inc.
Price 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 4.5 3.8 3.2 2.8 2.4 Volume 1,700,000 1,000,000 580,000 340,000 200,000


S&P 500 Sep 2004


Jun 2004



Mar 2004


Dec 2003



Sep 2003
1/2

Jun 2003


Mar 2003



Dec 2002



Sep 2002 Jun 2002


Would you buy this stock? Mar 2002 Dec 2001

454 Bonus Chapter
Volume
3,000,000
5,000,000
8,000,000
1,800,000
Price
100
160
190
140
120
22
26
12
10
14
19
16
60
70
80
50
30
34
40
7
8
S&P 500
Dec 2004 Mar 2006 Dec 2005 Sep 2005 Jun 2005 Mar 2005 © 2009 Investor’s Business Daily, Inc.
s Enormous upside e id i u s Sep 2004
Yes Yes Y Y Y t t t i e E volume spike
stock? Would you buy this stock? o this y b Buy point B Cup with handle p Huge volume Huge volume H on breakout o Jun 2004 Mar 2004
Intuitive Surgical–2004 Weekly Chart yo y ld Wo 1/2 Dec 2003 Sep 2003 Jun 2003

454 Bonus Chapter © 2009 Investor’s Business Daily, Inc.




Price 190 160 140 120 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 Volume 8,000,000 5,000,000 3,000,000 1,800,000


S&P 500 Mar 2006




Dec 2005



Sep 2005



Jun 2005


Mar 2005



Dec 2004






s Enormous upside e id i u s Sep 2004
Yes Yes Y Y Y t t t i e E volume spike
stock? Would you buy this stock? o this y b Buy point B Cup with handle p Huge volume Huge volume H on breakout o Jun 2004 Mar 2004








Intuitive Surgical–2004 Weekly Chart yo y ld Wo 1/2 Dec 2003 Sep 2003 Jun 2003

Test Your Knowledge
Volume
600,000
200,000
1,400,000
3,000,000
Price
4.0
3.4
3.0
14
12
10
16
40
34
30
50
80
70
60
26
22
19
6
5
8
7
S&P 500
Sep 2006 Dec 2007 Sep 2007 Jun 2007 Mar 2007 Dec 2006 © 2009 Investor’s Business Daily, Inc. 455
Jun 2006
Mar 2006
Dec 2005 Sep 2005
Would you buy this stock? New Issue $10.5 Jun 2005 Mar 2005

Test Your Knowledge 455


© 2009 Investor’s Business Daily, Inc.
Price 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 5 4.0 3.4 3.0 Volume 3,000,000 1,400,000 600,000 200,000


S&P 500 Dec 2007



Sep 2007



Jun 2007


Mar 2007



Dec 2006



Sep 2006



Jun 2006


Mar 2006



Dec 2005 Sep 2005

Would you buy this stock? New Issue $10.5 Jun 2005 Mar 2005

456 Bonus Chapter
600,000
Volume
200,000
3,000,000
1,400,000
Price
4.0
3.4
3.0
26
22
34
30
19
12
10
16
14
50
40
60
80
70
5
8
7
6
S&P 500
Weak upside volume on
e
e
Lagging RS line
Lagging RS line
right side of base
e
n
f b
o
id
Faulty cup with handle
Faulty cup with handle
iht s
d
No
o
No
W
r
?
Would you buy this stock?
p
tock?
Huge downside
ownside
volume on lef ft
y
c
i
side of base
Huge do
st
e b
s
d
f
this
s
d
id
u
o
t
buy
u
you
o
Would
d
Wo
Sep 2006 Mar 2008 Dec 2007 Sep 2007 Jun 2007 Mar 2007 Dec 2006 © 2009 Investor’s Business Daily, Inc.
Jun 2006
Mar 2006
Silicon Motion Tech Ads–2007 Weekly Chart Dec 2005 Sep 2005 Jun 2005

456 Bonus Chapter © 2009 Investor’s Business Daily, Inc.




Price 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 5 4.0 3.4 3.0 Volume 3,000,000 1,400,000 600,000 200,000


S&P 500

Mar 2008

e e n e
Lagging RS line Lagging RS line Weak upside volume on right side of base f b o id Dec 2007

d
No No o Faulty cup with handle Faulty cup with handle W iht s r Sep 2007
tock? ? c st s s p y ownside Huge downside i Huge do d volume on lef ft e b side of base f Jun 2007
Would you buy this stock? this t buy u you o d u o d id Mar 2007









Would
Wo


Sep 2006 Dec 2006


Jun 2006



Mar 2006
Silicon Motion Tech Ads–2007 Weekly Chart Dec 2005 Sep 2005 Jun 2005

Test Your Knowledge
800,000
Volume
200,000
400,000
4,000,000
1,600,000
Price
3.2
3.8
4.5
2.8
1.7
2.0
2.4
26
22
19
40
34
30
16
10
12
14
6
7
8
S&P 500
Sep 2003 Dec 2004 Sep 2004 Jun 2004 Mar 2004 Dec 2003 © 2009 Investor’s Business Daily, Inc. 457
Jun 2003
Mar 2003
Dec 2002
Would you buy this stock? Sep 2002 Jun 2002 Mar 2002

Test Your Knowledge 457


© 2009 Investor’s Business Daily, Inc.
Price 40 34 30 26 22 19 16 14 12 10 8 7 6 4.5 3.8 3.2 2.8 2.4 2.0 1.7 Volume 4,000,000 1,600,000 800,000 400,000 200,000


S&P 500
Dec 2004



Sep 2004



Jun 2004


Mar 2004



Dec 2003



Sep 2003


Jun 2003



Mar 2003



Dec 2002
Would you buy this stock? Sep 2002 Jun 2002 Mar 2002

458 Bonus Chapter
400,000
800,000
Volume
200,000
4,000,000
1,600,000
Price
3.0
3.4
4.0
1.8
2.2
2.6
26
22
34
30
19
12
10
16
14
50
40
6
5
7
8
S&P 500
Below average volume
u
on breakout week
e
ge
e
o
V-shaped cup
V shaped cup
Lagging RS line
Lagging RS line
with handle
b
o
d
S
No
Would you buy this stock? No
a
stock?
?
L
own week
own week
y volume
c
u
w
on heavy
y
y
y
o
s
o
Huge do
o
Huge do
o
this
u
n
i
0
down 48% while S&P 500
buy
than normal. Stock was
than normal. Stock was
u
Correction was deeper
Correction was deeper
r
a
d
you
u
e
o
n 7%
was down 7%
%
w
w
7
y
a
d
Would
4
o
as do
o
as do
o
t
o
h
w
d
C
W
Dec 2003 Mar 2005 Dec 2004 Sep 2004 Jun 2004 Mar 2004 © 2009 Investor’s Business Daily, Inc.
Sep 2003
Jun 2003
Mar 2003
Dec 2002
Sonic Solutions–2004 Weekly Chart Sep 2002 Jun 2002

458 Bonus Chapter © 2009 Investor’s Business Daily, Inc.




Price 50 40 34 30 26 22 19 16 14 12 10 8 7 6 5 4.0 3.4 3.0 2.6 2.2 1.8 Volume 4,000,000 1,600,000 800,000 400,000 200,000


S&P 500 No V-shaped cup V shaped cup a with handle d Lagging RS line Lagging RS line S Below average volume u ge e o on breakout week e o b Mar 2005 Dec 2004





Would you buy this stock? No ? stock? c s this i buy u you u y r Correction was deeper Correction was deeper d w than normal. Stock was than normal. Stock was a o a 0 down 48% while S&P 500 e w % n 7% 7 L own week own week w Huge do Huge do o o o o u y volume u y on h











was down 7%
Would
d
o
as do
4
as do
o
o
t
o
h
w
C
d
W
Dec 2003 Mar 2004
Sep 2003
Jun 2003
Mar 2003



Dec 2002
Sonic Solutions–2004 Weekly Chart Sep 2002 Jun 2002

Test Your Knowledge
15,400
8,000
Volume
30,000
4,200
2,200
Price
120
100
140
14
16
10
12
19
50
40
60
80
70
30
34
22
26
6
7
8
5
Dow Jones Ind.
Jun 1926 Sep 1927 Jun 1927 Mar 1927 Dec 1926 Sep 1926 © 2009 Investor’s Business Daily, Inc. 459
Mar 1926
Dec 1925
Sep 1925
Would you buy this stock? Jun 1925 Mar 1925 Dec 1924

Test Your Knowledge 459


© 2009 Investor’s Business Daily, Inc.
Price 140 120 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 5 Volume 30,000 15,400 8,000 4,200 2,200




Sep 1927

Dow Jones Ind. Jun 1927




Mar 1927



Dec 1926



Sep 1926


Jun 1926



Mar 1926



Dec 1925


Sep 1925
Would you buy this stock? Jun 1925 Mar 1925 Dec 1924

460 Bonus Chapter
Price
220
260
190
140
160
400
340
300
Dow Jones Ind.
Would you buy this stock? Yes 120 100 s s s s Yes Y Y Y stock? k o this h buy y b you y 80 base Base-on-base a on o Base a 70 60 Has trouble breaking out Has trouble breaking out g a e t Buy point y of double bottom, but then e u m b o holds in
Would
u
Double bottom b Dec 1926 Sep 1926
Prior uptrend Prior uptrend o Jun 1926 Mar 1926
d d
Wright Aeronautical–1927 Weekly Chart Dec 1925 Sep 1925

460 Bonus Chapter © 2009 Investor’s Business Daily, Inc.




Price 400 340 300 260 220 190 160 140 120 100 80 70 60 45 38 32 28 24 20 17 15 Volume 80,000 50,000 30,000 18,000



Dow Jones Ind. Jun 1928




Mar 1928
e m
Huge volume v g H on breakout t e o Dec 1927


Flat base at base s Fla l

s s s s Yes Y Y Y stock? k Buy point y Tight h Ti closes closes s t t Sep 1927
Would you buy this stock? Yes o this h buy y b you y base Base-on-base a on o Base a Has trouble breaking out Has trouble breaking out g a e t of double bottom, but then e u m b o holds in a nice tight flat base holds in a nice tight flat base b t n s Ma












Would
u
Double bottom b Dec 1926 Sep 1926



d d
Prior uptrend Prior uptrend o Jun 1926

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

Test Your Knowledge
80,000
40,000
20,000
Volume
160,000
Price
100
4.5
3.8
14
16
10
12
50
40
34
80
70
60
26
30
19
22
7
6
8
Dow Jones Ind.
2/1
Mar 1960 Jun 1961 Mar 1961 Dec 1960 Sep 1960 Jun 1960 © 2009 Investor’s Business Daily, Inc. 461
Dec 1959
3/1
Sep 1959
Jun 1959
Identify the sell signals 13/10 Mar 1959 Dec 1958 Sep 1958

Test Your Knowledge 461


© 2009 Investor’s Business Daily, Inc.
Price 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 4.5 3.8 Volume 160,000 80,000 40,000 20,000




Dow Jones Ind. Jun 1961



Mar 1961

2/1
Dec 1960



Sep 1960



Jun 1960


Mar 1960



Dec 1959
3/1


Sep 1959



Jun 1959
Identify the sell signals 13/10 Mar 1959 Dec 1958 Sep 1958

462 Bonus Chapter
40,000
80,000
20,000
Volume
160,000
Price
100
4.5
3.8
34
30
26
60
50
40
14
12
10
22
19
16
80
70
6
8
7
breaks 10-week
Late sell signal,
line on heavy
volume
volume
Dow Jones Ind.
re
o
a
n
Widest weekly
Widest weekly
y
Second split
in 1 year
r
w
spread
spread
d
e
r
i
up 55% in 3 weeks
up 55% in 3 weeks
s
ell: climax top
: climax top
w
o
2/1
m
Sell: clim
m
m
Sell: clim
l
Sell:
Sell
p
p
Mar 1960 Jun 1961 Mar 1961 Dec 1960 Sep 1960 Jun 1960 © 2009 Investor’s Business Daily, Inc.
Dec 1959
3/1
Sep 1959
Jun 1959 Mar 1959
Brunswick–1959 Weekly Chart Cup with handle h 13/10 Dec 1958 Sep 1958

462 Bonus Chapter © 2009 Investor’s Business Daily, Inc.




Price 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 4.5 3.8 Volume 160,000 80,000 40,000 20,000
Late sell signal, breaks 10-week re line on heavy volume volume


Dow Jones Ind. a n o y Widest weekly Widest weekly w Second split r in 1 year Jun 1961




s w d spread spread r e i Mar 1961
ell: climax top : climax top o m Sell: clim m m Sell: clim l Sell: Sell up 55% in 3 weeks up 55% in 3 weeks p p 2/1 Dec 1960






Sep 1960



Jun 1960


Mar 1960



Dec 1959
3/1


Sep 1959



Jun 1959



Cup with handle h 13/10 Mar 1959

Brunswick–1959 Weekly Chart Dec 1958 Sep 1958

Test Your Knowledge
80,000
40,000
Volume
300,000
160,000
Price
100
4.0
3.4
14
16
10
12
50
40
34
80
70
60
26
30
19
22
5
6
8
7
S&P 500
Sep 1982 Dec 1983 Sep 1983 Jun 1983 Mar 1983 Dec 1982 © 2009 Investor’s Business Daily, Inc. 463
Jun 1982
Mar 1982
Dec 1981 Sep 1981
Identify the sell signals Jun 1981 Mar 1981

Test Your Knowledge 463


© 2009 Investor’s Business Daily, Inc.
Price 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 5 4.0 3.4 Volume 300,000 160,000 80,000 40,000


S&P 500 Dec 1983




Sep 1983



Jun 1983


Mar 1983



Dec 1982



Sep 1982


Jun 1982



Mar 1982



Dec 1981 Sep 1981


Identify the sell signals Jun 1981 Mar 1981

464 Bonus Chapter
Price
100
22
50
16
19
30
26
40
34
60
70
80
12
14
10
8
S&P 500
Widest weekly
Widest weekly
e
spread
a
e
p
Breaks upper
channel line
n
n
k
k
B
dle 7 e 6 5 4.0 3.4 Volume 300,000 160,000 80,000 40,000 Dec 1983 Sep 1983 Jun 1983 Mar 1983 Dec 1982 Sep 1982 © 2009 Investor’s Business Daily, Inc.
Cup with handle i h h h w
Jun 1982
C
C
Mar 1982
Dec 1981
Sep 1981
Collins & Aikman–1982 Weekly Chart Jun 1981 Mar 1981

464 Bonus Chapter © 2009 Investor’s Business Daily, Inc.




Price 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 6 5 4.0 3.4 Volume 300,000 160,000 80,000 40,000


S&P 500 Dec 1983
Widest weekly Widest weekly e e spread a


Sep 1983
p
Breaks upper k k B channel line n n Jun 1983




Mar 1983



Dec 1982



Cup with handle i h h h w
dle e Sep 1982

Jun 1982
C
C

Mar 1982



Dec 1981


Sep 1981
Collins & Aikman–1982 Weekly Chart Jun 1981 Mar 1981

© 2009 Investor’s Business Daily, Inc.
200,000
1,600,000
400,000
800,000
June 1999
Ma y
Apri l
March
February
January
December
2,000,000
12,000,000
7,000,000
4,000,000
Price Price Identify the sell signals 190 Daily Chart 160 140 120 150 100 80 70 60 50 100 40 34 30 26 22 19 50 16 14 12 tant to 10 tif 8 7 Volume Volume Test Your Knowledge 465
Some sell signals are more obvious Some sell signals are more obvious m a a s on weekly charts and others on daily s t r c charts. That’s why it’s important to o it’s impo m h That’s w a analyze both. Review this stock’s t i e R t weekly and daily c
e
kly
l
ts
z
s
3/2
cha
e
e
n
o
n
h
Dec 1998 Sep 1998
Identify the sell signals Weekly Chart S&P 500 Jun 1998 Mar 1998

Test Your Knowledge 465



Price 150 100 50 Volume 1,600,000 800,000 400,000 200,000 © 2009 Investor’s Business Daily, Inc.


June 1999




Ma y


Apri l March


Identify the sell signals Daily Chart February January














Price 190 160 140 120 100 80 70 60 50 40 34 30 26 22 19 16 14 12 tant to 10 tif 8 7 Volume 12,000,000 7,000,000 4,000,000 2,000,000 December
Some sell signals are more obvious Some sell signals are more obvious m a a s on weekly charts and others on daily s t r c charts. That’s why it’s important to o it’s impo m h That’s w a analyze both. Review this stock’s t i e R t weekly and daily c







e
l
kly
z
s
ts
3/2
cha
e
o
e
n
h
n
Dec 1998 Sep 1998
Identify the sell signals Weekly Chart S&P 500 Jun 1998 Mar 1998

466 Bonus Chapter

Price Price Largest daily Largest daily i t g L Charles Schwab–1998 gain: up 11% % 1 p : 190 Daily Chart in one day in one day y d n n 160 Exhaustion gap p p p p Exhaustion gap u x 140 120 150 100 Up 60% in 8 days s a 8 0 p 80 and 7 out of 8 of 8 tof and7ou 7 n



Jun 1999

Widest weekly Widest weekly we e W spread a Sell: climax top ax li c Sll Heavy a volume l l 3/2 Mar 1999
y p t

e
s
Dec 1998
e e Cup with handle a Sep 1998
Charles Schwab–1998 Weekly Chart S&P 500 u Jun 1998 Mar 1998

466 Bonus Chapter



Price 150 100 50 Volume 1,600,000 800,000 400,000 200,000 © 2009 Investor’s Business Daily, Inc.


June 1999



e m May
Heavy v He volume o
%
Largest daily Largest daily i t g gain: up 11% 1 p : in one day in one day y d n n p p p p April

Exhaustion gap Exhaustion gap u x Up 60% in 8 days s a 8 0 and 7 out of 8 of 8 tof and7ou 7 p days up y March
L
Charles Schwab–1998 Daily Chart p n a February January














Price 190 160 140 120 100 80 70 60 50 40 34 30 26 22 19 16 14 12 10 8 7 Volume 12,000,000 7,000,000 4,000,000 2,000,000 December



Jun 1999

y p t
Widest weekly Widest weekly we e W spread a Sell: climax top ax li c Heavy a volume l l 3/2 Mar 1999

Sll
e
s
Dec 1998
e e Cup with handle a Sep 1998
Charles Schwab–1998 Weekly Chart S&P 500 u Jun 1998 Mar 1998

© 2009 Investor’s Business Daily, Inc.
7,000,000
4,000,000
2,000,000
13,000,000
August 2006
July
June
May
April
March
February
8,000,000
16,000,000
2,000,000
4,000,000
Price Price Identify the sell signals 46 Daily Chart 50 36 27 23 19 40 16 13 11 9 30 7 6 4.6 20 3.6 2.7 2.3 2.0 10 1.6 1.4 1.1 0.9 Volume Volume Test Your Knowledge 467
Some sell signals are more obvious on weekly charts and others on daily charts. That’s why it’s important to analyze both. Review this stock’s weekly and daily chart and identify the sell signals. 4/1 Jun 2006 Mar 2006
Sep 2006
Dec 2005
Identify the sell signals Weekly Chart S&P 500 2/1 Sep 2005 Jun 2005 Mar 2005

Test Your Knowledge 467



Price 50 40 30 20 10 Volume 13,000,000 7,000,000 4,000,000 2,000,000 © 2009 Investor’s Business Daily, Inc.
August 2006





July


June


May
Identify the sell signals Daily Chart April March














Price 46 36 27 23 19 16 13 11 9 7 6 4.6 3.6 2.7 2.3 2.0 1.6 1.4 1.1 0.9 Volume 16,000,000 8,000,000 4,000,000 2,000,000 February Sep 2006

Some sell signals are more obvious on weekly charts and others on daily charts. That’s why it’s important to analyze both. Review this stock’s weekly and daily chart and identify the sell signals. 4/1 Jun 2006 Mar 2006










Dec 2005
Identify the sell signals Weekly Chart S&P 500 2/1 Sep 2005 Jun 2005 Mar 2005

468 Bonus Chapter

Price Price Largest daily y a s g g L Hansen–2004 % gain: up 14% % u day n g g g 46 in one day y in one o i Daily Chart 50 36 27 Up 44% in n % p 4 U 23 4 days ay 4 19 40 16 13 haustion gaps s s g o hau Exhau h 11 9 30 7 6 4.6 20 3.6 2.7 2.3 2.0 10
Widest weekly w e Wi d spread e Excessive Excessive i 4/1 Sep 2006


split
x
p
Jun 2006
Sell: climax top a c e Heavy Heavy av volume u Mar 2006
p
p

Dec 2005


Sep 2005
2/1
Hansen–2004 Weekly Chart S&P 500 Jun 2005 Mar 2005

468 Bonus Chapter



Price 50 40 30 20 10 Volume 13,000,000 7,000,000 4,000,000 2,000,000 © 2009 Investor’s Business Daily, Inc.
August 2006





July
Largest daily y a s g g L % gain: up 14% % u day n g g g in one day y in one o i haustion gaps s s g o Heavy v H H volume volume v June


hau
Exhau
h
May
n
Up 44% in % p 4 U 4 days ay 4 April

Hansen–2004 Daily Chart March February









Price 46 36 27 23 19 16 13 11 9 7 6 4.6 3.6 2.7 2.3 2.0 1.6 1.4 1.1 0.9 Volume 16,000,000 8,000,000 4,000,000 2,000,000
Widest weekly w e Wi d spread e Excessive Excessive i 4/1 Sep 2006


split
p
x
Jun 2006
p
p
Sell: climax top a c e Heavy Heavy av volume u Mar 2006

Dec 2005


Sep 2005
2/1
Hansen–2004 Weekly Chart S&P 500 Jun 2005 Mar 2005

Test Your Knowledge 469


How to Make Money

in Stocks Quiz











1. The “M” in CAN SLIM stands for
A. making new highs
B. margins
C. market direction
D. money
2. As recommended by the CAN SLIM Investment System, you should
sell a stock if
A. it falls 7% from its 52-week high
B. it falls 10% from the price at which you purchased it
C. it climbs above its 50-day moving average on heavy volume
D. it falls 7% to 8% from the price at which you purchased it
E. it moves sideways on heavy volume
3. Which of the following indicators generally has the least impact on a
stock’s price?
A. Quarterly earnings growth
B. P/E ratio
C. Return on equity
D. Annual earnings growth
E. Sales growth
4. Which of the following is NOT a proper chart pattern?
A. Saucer with handle
B. Ascending base
C. Cup with handle
D. Double bottom
E. Triple bottom
5. It is recommended that a stock have at least ________ return on equity.
A. 15%
B. 25%
C. 17%
D. 30%
E. None of the above

470 Bonus Chapter


6. It is recommended that a stock have had a prior uptrend in share price
of at least how much?
A. 100%
B. 60%
C. 30%
D. 10%
7. In the cup-with-handle base, which of the following is true?
A. It is more U-shaped and is at least 7 weeks in duration
B. It is more V-shaped and is at least 16 weeks in duration
C. The shape of the cup with handle is not important
D. It is more U-shaped due to a shake out of weaker investors
E. None of the above is true
8. In a proper cup-with-handle base, the handle should form at a price
that is
A. 7% above the previous high
B. 10% above the previous high
C. 15% below the previous high
D. 25% below the previous high
9. Typically, a “climax top” is reached when a stock’s price has moved up
for many months, then it moves _________ in one to three weeks.
A. up 15% to 25%
B. down 15% to 20%
C. down 10% to 15%
D. up 25% to 50%
E. None of the above
10. Regardless of the type of base, the breakout should occur on volume
that is
A. at least 25% above the average volume
B. at least 60% below the average volume
C. at least 40% below the average volume
D. at least 50% above the average volume
E. at least 20% above the average volume
11. A flat base is defined as a sideways chart pattern where a stock corrects
no more than 15% over a minimum period of
A. 3 weeks
B. 5 weeks
C. 7 weeks
D. 8 weeks

Test Your Knowledge 471


12. How many pullbacks occur during an ascending base?
A. 1
B. 2
C. 5
D. 3
13. You should not chase a stock when it is extended in price more than
____ past a correct buy point.
A. 3%
B. 5%
C. 7%
D. 10%
14. In this chart pattern, a stock usually doubles in price over a four-to-
eight-week time period:
A. Base on top of a base
B. High tight flag
C. Ascending base
D. Flat base
15. In a double bottom base, the “shakeout” occurs
A. at the second bottom
B. at the first bottom
C. just prior to the pivot point
D. when the current stock price equals or exceeds the previous high
16. ____ out of 4 stocks follow the trend of the general market.
A. 1
B. 2
C. 3
D. 4
E. 5
17. Most of the trading activity in the market is done by
A. individual investors
B. day traders
C. hedge funds
D. institutional investors
18. Which of the following are signals that a stock may be topping?
A. Climax top
B. Lagging relative strength
C. Change in trend
D. All of the above

472 Bonus Chapter


19. A technical characteristic of a weakening stock is
A. a stock that has its highest P/E ratio in the past year
B. a stock that is slipping below its 50-day moving average as volume
increases
C. a stock that is reporting decelerating quarterly earnings
D. a stock that reaches its highest price in the past 12 months
20. In a bull market, if the majority of individual stock leaders start break-
ing down, this usually signals a
A. climax top
B. market top
C. base building period
D. market bottom

Test Your Knowledge 473


Answer Key









1. C
2. D
3. B
4. E
5. C
6. C
7. A
8. C
9. D
10. D
11. B
12. D
13. B
14. B

15. A
16. C
17. D
18. D
19. B
20. B

474 Bonus Chapter


We hope that you found this bonus section valuable. Remember, learning to
read charts and identify bases takes time, but the more charts you look at,
the better you’ll get at spotting stocks with the potential for big price gains.
Plus, there are many free resources available on Investors.com to help you:
• Investors.com offers oversized, color charts to make it easier to recognize
bases and identify exact buy points.
• IBD TV provides daily videos highlighting specific stocks as well as
lessons on how to read charts.
• IBD University provides additional education content on the CAN SLIM
Investing System, fundamental analysis, and general market analysis.

Also, IBD Meetups bring CAN SLIM investors together in communities
throughout the nation. The Meetups are a fun way for investors of all expe-
rience levels to get together and discuss IBD’s approach, specific stock
ideas, and the general market. Learn more at www.investors.com/meetup.
Learning to invest the right way does take some time, but tens of thou-
sands of people just like you have used the CAN SLIM Investing System
and the tools available from IBD and Investors.com to be more successful
in the stock market. You can do it too!

Success Stories


















Over the course of 25 years and counting, Investor’s Business Daily has heard
from countless readers who have experienced life-changing financial suc-
cess because of the CAN SLIM and IBD method. The following is a small
sample of the thousands of success stories we’ve received over the years
from people of all ages and experience levels. It’s a powerful testament to
the fact that with a little hard work, patience, and dedication, anyone can
learn to follow this system to improve their results.


Market Timing

“IBD is a proven and no-nonsense approach to investing. This system has
helped me find the big winners in a market rally, and more importantly, it
has helped me avoid the big losses in a market downturn. This, in turn, has
allowed me to retire in my early fifties, spend more time with my family,
work on my hobbies and interests, and generally lead a very happy life.”
Michael A., Florida, Retired
“I shared IBD’s ‘The Big Picture’ recommendation to trim equity holdings
and raise cash in December 2007 with my ‘smart friends’ (attorney and
financial services manager). I reiterated the fact that IBD had had the
same market call in January 2000. While my friends and colleagues were
chasing financials (see falling knife), my wife and I were able to buy quality
CAN SLIM stocks at proper breakpoints. Suffice it to say that my wife and I




475

476 Success Stories


have had a great year being in cash for most of 2008. Thanks, IBD! Rest
assured, you may have two more subscribers on the way!!!”
Ken C., California, Financial Advisor
“I’ve been a follower of IBD for around 17 years. A serious follower for the
last four years. In 2007, I achieved a return of +56% in my trading account,
and I broke even in 2008 by staying out of the market for most of the year.
The system has never failed me. The paper’s content, format, and teachings
have only gotten better over the years.”
Eric M., Illinois, Engineer
“I have been a reader of IBD since 2005 and have profited immensely from
it. Also, I have attended more than five IBD workshops from level 1 to level
3, and each has made me a better disciplined investor. The CAN SLIM sys-
tem, a system that works great whether in good times or bad times.”
Rajesh S., Texas, Electrical Engineer

“I’d like to take a moment to thank IBD for ‘The Big Picture’ and the mar-
ket outlook. I’m a federal employee with a 401(k) plan called the Thrift Sav-
ings Program. We are limited to five basic funds. The government or ‘G’
Fund is invested in government securities and is our safe haven. The ‘C’
Fund is our S&P 500 stock fund, the ‘F’ Fund is our commercial bond fund,
the ‘S’ Fund is our small-cap fund, and finally the ‘I’ fund is our international
fund. By using ‘The Big Picture’ and market outlook, I was able to follow the
general market trend and move all of my retirement funds out of the market
and into a cash position in the ‘G’ fund. While most of my coworkers suf-
fered huge losses in the market and the market in general lost over 35%, my
total return for 2008 was up 4%. I simply check ‘The Big Picture’ every day
and move my money either into or out of the market using market outlook
information. Again, thanks for your hard work.”
Brian D., Florida, Supervisory Special Agent


No Opinions, Only Facts

“In describing IBD, I would say it is without doubt one of the best sources
of information for investors that is available for the money. You don’t get any
‘Wall Street’ spin on the markets from IBD. It gives you the straight stuff. By
that, I mean IBD tells you the truth about the markets, economy, political
events, etc., that affect the markets, whether positive or negative. That is
huge in this climate because there is a lot of ‘Financial Nonsense’ being fed
to investors by too many unreliable sources these days. IBD tells investors
the truth. You can count on it!”
Steve C., Texas, Ophthalmologist

Success Stories 477


“IBD and Investors.com let you focus on what the market is actually doing
at any given moment, allowing you not to have to listen to all the noisy for-
tune tellers on the tube.”
Norm D., California, Individual Investor
“IBD is a tremendous time-saver. I make it a part of my daily process to read
IBD every business day, even if I do not read anything else. It is a great way
to quickly get a feel for the general market direction, continue to remain
educated, and learn about the secrets of success that keeps me motivated.
Where else can you get that in about 15 minutes a day? It is an extraordinary
publication!”
George M., California, Executive
“To me, Investor’s Business Daily is an outstanding market analysis resource
because it is based on objective empirical research that cuts through pundit
opinions and personal emotions in buying and selling stock. Its greatest
strength is its direct, clear-thinking presentation of market-relevant news
that leaves often confused approaches of other publications behind.”
Allen A., Connecticut, Ph.D.


CAN SLIM

“Just studying IBD and CAN SLIM shows that if you really apply yourself
properly, you can succeed. You don’t have to be at the mercy of so-called
experts who really aren’t. I don’t like the intimidation tactics or the pressure
tactics of the money managers. There are no guarantees in investing, but
with IBD and CAN SLIM, the odds are on your side.”
Carol T., Massachusetts, Anesthesiologist

“I have been trading stocks full time since 2003, thanks largely to William
O’Neil’s How to Make Money in Stocks and IBD. I have reread the book
many times and am rereading it again. It is full of different-color marks, as
each time I read it I find something new and useful. I must say, How to Make
Money in Stocks, the IBD subscription, and the online tools are essential to
successful stock trading. Just like people grab their family photo albums
from the house on fire, if I were to pick just one thing to assure my contin-
ued success in stock trading, it would be William O’Neil’s How to Make
Money in Stocks.”
Slav F., California, Stock Trader


Proven Rules

“Investor’s Business Daily is a source for useful and accurate information
about how the market works. I have found that following the buy and sell

478 Success Stories


rules works. If you follow those seemingly simple but at times hard to follow
rules, you will make money.”
Herb M., Michigan, Individual Investor
“It was only when I started properly applying the IBD sell rules that I realized
the power to not only cut losses short, but stay away when conditions are not
good for making money. A day without IBD is a day of missed opportunity.”
Dennis H., Florida, Retired Broker
“William O’Neil taught me the two rules that form the cornerstone of my
investing plan: (1) keep your losses small, and (2) average up, never down.
Those two simple rules have kept me out of a lot of trouble. When I have
strayed from them, it inevitably cost me money. Thank you, Bill, for all you
have done for the average investor.”
Peter M., California, Executive


Investor Education at Its Best

“I have gone to great lengths to learn about investing. I attended business
school as an undergraduate and graduate student, and worked for a retail
brokerage firm and for a small-cap research firm that supported institutional
clients. Even after all this experience, it wasn’t until I read How to Make
Money in Stocks that I began to understand how to succeed in the market.”
Andrew M., New York, Vice President

“My students were participating in the Stock Market Game and struggling
with losses. Then they started using Investor’s Business Daily. IBD helped
my students reverse big losses and win third place in the Stock Market
Game. IBD has helped motivate my students to get great information in an
easy-to-use format. It’s given them the tools to research and make invest-
ment decisions, and become their own independent investors.”
Stephen D., New York, High School Teacher
“I’ve been a subscriber to Investor’s Business Daily since 1991. This is
investor education at its best. I fired my broker two weeks after I got IBD. I
told him I didn’t need him anymore. I trade over 150,000 shares each year.
I used to have no savings, but because of IBD, my net worth is well over 1
million dollars. I run it as a business. I’m just an average guy, I’m not a
genius, but I study a lot and use IBD. That’s how I succeed. It’s more than a
newspaper; it’s a working document.”
George G., Georgia, Pilot Trainer

“My stock life before IBD had no direction. I had no idea there was anything
to learn. Life after IBD opened my eyes, and my mind. I don’t ever expect
to stop learning!”
Marilyn W., Ohio, Retired

Success Stories 479


“Investing without IBD is like trying to live without water. IBD will give you
the proper structure to make informed and assessed decisions about the
general market or a particular stock issue, intelligently. I have taught the
principles of the paper to several hundred of my college students over the
past four years, and they have had fantastic results. They do not invest with-
out it, and neither do I.”
James D., Florida, College Instructor
“Spend a year learning everything there is to learn in IBD. It’s like getting
your doctorate in investing without going to four schools. It’s the easiest,
quickest way to become a savvy investor, regardless of how much you have
to invest.”
Julie P., Colorado, Author, Nutritionist

“I have been subscribing to IBD since first studying stocks about 1990 and
would not do without it. I read it every day, and it is like my right hand.”
Averie M., Florida, Retired
“Over my 18 years of teaching junior high, high school, and college, I have
used a wide variety of texts, videos, Web sites, newspapers, magazines, com-
puters, and board games in teaching my students about investing. Without
question, IBD has been the most exciting and pertinent resource I have ever
used on the basis of student success in investing as well as student motiva-
tion to use the resource.”
Mike S., Texas, Teacher


Real Performance

“I figure I’ve made more money in stocks using IBD as my daily resource
than I’ve made as a CPA over the last 10 years.”
Robert F., Illinois, CPA
“With Bill O’Neil’s guidance, I was able to reach my goal. I now can enjoy
and support my 12-year-old twin sons, trading stocks as a single, work-at-
home Dad. Bill’s stock wisdom allowed me to grow and protect my hard-
earned money plus enabled me to live a more rewarding lifestyle.”
Tim K., California, Chief Investment Officer

“I’ve been reading IBD since its inception. I started with $5,000, and three
years later, it escalated to $50,000. Why? Because of IBD. Need I say more?”
Fred B., New York, Arbitrator
“Since I started using CAN SLIM and IBD, and now Investors.com, I was
able to make 359% on my original investment! IBD has so many features
that help me find the great stocks. I’m grateful for all the work you do to
help investors.”
Kathleen P., California, Individual Investor