Can you please explain how to recognize when an index or a stock flashes a buy or sell signal. (February 1, 2001)
This is a great question and one that will take a long time to explain. Indeed, we are going to cover this in detail as a main topic in our upcoming seminar series. In a nutshell, while there are all kinds of oscillators and vague tea leaves, but the key is whether institutions are buying into a move up and whether leading stocks are ready to move up. Stock charts show graphical representations of investor fear and greed. Volume shows if institutions are moving in to capitalize on that those emotions. We want to see the index reverse a downtrend and then confirm that downtrend on a large gain and a sharp rise in volume. At the same time we want to see leading stocks breaking out of solid patterns and hitting new highs. That is the best indicator that a serious bull move is starting. Right now the Nasdaq is not at that point, but there are financial stocks breaking out and other stocks from scattered sectors doing the same. The indexes are performing better and are giving stocks time to complete there bases. Once we see them start breaking out of those bases in high numbers, the move is on.
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