Reading Key Selling Indicators
Just like stocks flash signals before making huge gains, they can also show certain characteristics that indicate potential trouble. In this lesson, you'll learn to identify the warning signs of a weakening stock.
#1. Market Direction
- Review the S&P 500, Nasdaq Composite and Dow Jones Industrials price and volume charts every day in Investor's Business Daily to spot when three to five or more days of distribution occur over a few weeks. History shows that this is typically when the general market will turn down into a correction and most stocks follow it down. You should be reducing positions and moving off margin.
- Don't buy stocks until you see a second confirmation of an attempted rally in a market index that has "followed through" with an increase in price of 2% or more on volume larger than average and larger than the day before.
- Read IBD's "The Big Picture" and "Investor's Corner" columns every day to gain better insights into the market and investment skills.
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Related Resources:
Review IBD's 20 Rules For Stock Market Success.
Go to the Investor's Corner Archives to read IBD's "editor picks" of classic Investor's Corner columns.
Search our archive of Ask Bill O'Neil Q & A's organized by topic.
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