WEALTH UNIVERSITY

[Profe$$or]

STAGE 2: ADVANCING PHASE (see post this is linked to)

The ideal time to buy is when a stock is finally swinging out of its base into this more dynamic stage. Such a breakout above the top of the resistance zone and the 30-week MA should occur on im- pressive volume. This is the start of the advancing Stage 2 uptrend phase. However, before the really dynamic part of the advance gets rolling, be aware that there is usually an initial rally followed by at least one pullback. That dip brings the stock back close to the breakout point, which is a good second chance to do low-risk buying. Don't become a fanatic about saving a few cents per share! If the breakout occurs at 121/8, for example, the pullback may turn out to be 123/8 or 125/8 but will come close. The less it pulls back, the more strength it actually is showing. Interestingly enough, at the breakout point-which is the perfect time to buy-the reported fundamentals will often be negative. And unless your stockbroker is technically oriented, he may try to talk you out of buying the stock. In Stage 2, the 30-week MA usually starts turning up shortly after the breakout. The situation becomes a buyer's dream as each successive rally peak is higher than the last. In addition, the lows on corrections are also progressively higher. This is important! Don't expect the stock to be a one-way street no matter how bullish and powerful the pattern is. Chart 2-3 of International Paper il- lustrates what I am talking about. Once it moved into Stage 2 (shaded area) in early 1986, all downside corrections were con- tained above the rising 30-week MA, and each rally took IP to another new high. The market is always tricky and there is a reason why the overwhelming majority of investors lose money over the years in the market. The stock market (or any market for that matter) will do whatever is necessary to keep the majority from making money while amply rewarding the astute professional mi- nority. So expect two steps forward and one sharp step back. As long as all of these wild swings and shakeouts take place above the stock's rising 30-week MA, don't worry-everything is proceeding according to Hoyle and is on schedule for a big profit!