The best professionals use charts. 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. Similarly, maps are plotted and set to scale to help people understand exactly where they are and how to get to where they want to go.

And seismic data are traced on charts to help geologists study which structures or patterns seem most likely to contain oil. In almost every field, there are tools available to help people evaluate current conditions correctly and receive accurate information.

William J. O'Neil — 23 Trading Rules That Will Make You a Better Stock Trader

The same is true in investing. Economic indicators are plotted on graphs to assist in their interpretation. Would you allow a doctor to open you up and perform heart surgery if he had not utilized the critical necessary tools? Of course not. That would be just plain irresponsible. However, many investors do exactly that when they buy and sell stocks without first consulting stock charts. If nothing else, charts can tell you when a stock is not acting right and should be sold.

A chart records the factual price performance of a stock. Price changes are the result of daily supply and demand in the largest auction marketplace in the world. Would you fly in a plane without instruments or take a long cross-country trip in your car without a road map? Charts are your investment road map. In fact, the distinguished economists Milton and Rose Friedman devoted the first 28 pages of their excellent book Free to Choose to the power of market facts and the unique ability of prices to provide important and accurate information to decision makers.

Chart patterns, or bases, are simply areas of price correction and consolidation after an earlier price advance. The skill you need to learn in order to analyze these bases is how to diagnose whether the price and volume movements are normal or abnormal. Do they signal strength or weakness? Major advances occur off strong, recognizable price patterns discussed later in this chapter. Failures can always be traced to bases that are faulty or too obvious to the typical investor.

Fortunes are made every year by those who take the time to learn to interpret charts properly. To further emphasize this point: I have seen many high-level investment professionals ultimately lose their jobs as a result of weak performance. When this happens, their poor records are often a direct result of not knowing very much about market action and chart reading. Universities that teach finance or investment courses and dismiss charts as irrelevant or unimportant are demonstrating their complete lack of knowledge and understanding of how the market really works and how the best professionals operate.

As an individual investor, you too need to study and benefit from stock charts. As the number of investors in the market has increased over recent years, simple price and volume charts have become more readily available. Chart books and online chart services can help you follow hundreds and even thousands of stocks in a highly organized, time-saving way. Some are more advanced than others, offering both fundamental and technical data in addition to price and volume movement. We analyzed the greatest winning stocks of the past and discovered they all had seven common characteristics, which can be summarized in the two easy-to-remember words CAN SLIM.

We also discovered there were a number of successful price patterns and consolidation structures that repeated themselves over and over again. In the stock market, history repeats itself. Neither does the law of supply and demand. Price patterns of the great stocks of the past can clearly serve as models for your future selections.

One of the most important price patterns looks like a cup with a handle when the outline of the cup is viewed from the side. Cup patterns can last from 7 weeks to as long as 65 weeks, but most of them last for three to six months. A strong price pattern of any type should always have a clear and definite price uptrend prior to the beginning of its base pattern.

In most, but not all, cases, the bottom part of the cup should be rounded and give the appearance of a U rather than a very narrow V. This characteristic allows the stock time to proceed through a needed natural correction, with two or three final little weak spells around the lows of the cup. A more solid foundation of strong owners who are much less apt to sell during the next advance is thereby established. Your best choices are generally stocks with base patterns that deteriorate the least during an intermediate market decline.

Dozens of former high-tech leaders, such as JDS Uniphase, formed wide, loose, and deep cup patterns in the second and third quarters of These were almost all faulty, failure-prone patterns signaling that the stocks should have been avoided when they attempted to break out to new highs. Chart patterns correcting more than this during bull markets have a higher failure rate if they try to make new highs and resume their advance.

1. The Entry Phase

The reason? Stocks that come straight off the bottom into new highs off cups can be more risky because they had no pullbacks.

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Sea Containers was a glowing exception. Upon seeing such big numbers, one of the portfolio managers was instantly interested.

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Find your next favorite book. Create a List. Download to App. Ratings: Rating: 4. Length: pages 21 hours. Based on a major study of all the greatest stock market winners from to , this expanded edition gives you: Proven techniques for building stocks before they make big price gains Tips on picking the best stocks, mutual funds, and ETFs to maximize your gains new charts to help you spot today's profitable trends Strategies to help you avoid the most common investor mistakes!

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Follow these three steps and you'll be on the path to being a more successful investor. Personal Finance. Home Books Personal Finance. About the author WO. Related authors. Related Categories. Business Communication. Go for it. However the basic ideas are sound. However it has limitations. This might work for innovative technology firms, but there clearly are times that entire sectors move in tandem.

For example, energy stocks, airlines and gold miners have had coordinated gains or losses because of the coronavirus pandemic. These usually result from broad macro forces like the economy, politics and monetary policy. It focuses almost exclusively on income-statement items like revenue and profit. However, stocks often climb on hopes of future growth — long before it hits the income statement. Tesla TSLA is an example of that trend.