IBD AmericaGreatestOpportunity PDF

How To Find & Own America’s Greatest Opportunities By William O'Neil Chrysler was my first big {back in 1962. It was a classic cup with handle. The Dow had aterri- “ble break in early ’62 caused by Dow Jones tid’ the government announcing the 490 first investigation of the mutual 10 fund industry since the Depres- Fotontrough "Geena tng ORS, without further price progress 100 i i \ up was the top of the stack 90 Lo Follow-through id and time to start selling a H 5 aan Second selling sign heavy \ n \ volume with price \ we retracing prior two weeks 7 \ % 4 «6 Sell: Stock doubled from "Buy back 2 $15 to $34 and now heavy volume without YX: \ » % Rather patee proaress op ff, 8 1.-” Some volume cistribution a fon way up at +20% ($42) 2 Buy, coe rom ast buy point 2 ‘without 24 ‘ handle 2 6-week Buy flat base Ad 16 weeks v wpinarow CHRYSLER 5 Weekly Chart 2 closes mid-range and + 2 2 virtually unchanged on " huge volume support 0 36-week cup ° wth handle Heavy volume without further price progress up 8 Up weeks on higher volume, this } a ) Heavy volume stalling 7 is accumulation y Voune j ~ ~I Py 41,300,000 Hy 1 100,000 So a 30,000 | coon 29% —|+67% | +67% | +5% 450% [425% [445% | +176% |+5% 748% [442% |-50% | +42% EPs%cng Decer [Mars |xun62 [Sep 62 _|Dec62 |war63 |sune2 | Sepes |Deces |war6e |xunea |Sep64 |Dec6s vat» Along the bottom of the World War III affected the mar- «TheBattle for Investment Surviv- Chrysler cup, note how big-vol- ket and caused a shakeout in the aj,” that I had bought Chrysler, he ume buying showed up almost Chryslerhandle, which closed al- gid he also bought at that same every other week when the stock most unchanged for the week Joint It'snice toknow you're buy. closed up. Later, itwas known the (support). pre with sod: e ing with good company. Love brotherswereaccumulating Once an t was made Eee hired a well abigpost Position Thevolumepicked and the Soviet ships turned back, ry! desi a th asitadvanced six the market had a follow-through ;HGW) MEW sesiener an’ Mey Weck site boron T bought a day. Chrysler broke out at $58.50, bad new models. Tt was a turn, litdleat that time but sold asit cor- the pivoi-point price at that time 20und with two quarters o! rected tocreatethehandlearea. (chart is adjusted for two 2-for-1_ Strong earnings. So the next time During this time, a US. spy plane had taken pictures of Soviet missile bases under construction inCuba. Thatcreated a confronta- tion where Soviet ships loaded with missiles were to meet a U.S. Navy blockade. Fear of a possible splits), which is where I bought. A few weeks later Jerry Tsai of Fi- delity told me he had bought Chrysler at that same time. He saidhe liked to buy whenthere’sa lot of volume. When I mentioned. later to Gerald Loeb, author of you find aclassic cup with handle with signs of big volume accumulation, good earnings, with a breakout on huge volume on a new market follow-through, recognize that it’s probably not the publicbuying.How To Find & Own America’s Greatest Opportunities By Willam O'Neil Follow-through anigig6 Follow-through “' Follow-through “} Sell: 1 week straight down to 10-weak line and 1 week up with —=p.- next week at new high Is not a base and is at a very extended point PeopleSoft Weekly Chart Up 20% in 3 weeks, must hold for 8 ful weeks then reappraise, Stock came out of first correction, 60 hold longer Ny Tight closes ‘Add on rebound above 10-week line on volume << —_____ (price week closed below @-weok cup win 10-week Ine on low volume) si... handle and . K base on base A i 5 ‘Add os i 4 a2 38 34 20-week cup 2o-week cup with angle with hanale Volume increases Volume on down weeks up Heavy A volume Volume declines on Suppo +70% +75% we pullback Sell: closes below *10-week line on huge increase in average weekly volume with handle base labeled C at the left hand side of the chart that shows an overall price increase of 10 times. 47 ‘The first base is wrong and fails, the second one is 1% wrong and fails, the third 13 one is precisely right and -12 goes up 10 times. You can 11 andmust learn to recognize 460% | +56% +100% |+83% | +75% | +67% |+80% | +83% | +86% EPS % Chg War 8 [ana [Sep 04 [dace [wares [aun 35 [Sep 95 [Dec 95 [Mars6 [une |Sep96 [beeae [ware ate PeopleSoft was the leader in soft- on making anew high as the S&P thedifference, ware for human resourcemanage- ment. Itcame public in November 1992 at $17 and closed the week at $28, Eleven weeks later it hit$40 duringan uptrending general market. The next three weeks it dropped 40% and began a 17-month whipsaw period where it built three bases. ‘The first two were faulty and failed. The first base, labeled A in the insert at the lower right ofthe chart, was wide and loose, caus- ing failure when it broke out. The second, at B, had a handle in the lower half of the base and failed 500 had started a market corree- tion. ‘The reason I'm showing bases ‘A.Band Cin the insertis I want everyone to recognize a phenome- non that I’ve seen happen several times. It clearly explains why you need to become agood chart read- er who can tell the difference between a faulty pattern that will fail and the same stock that later on will suddenly form a classic cup with handle that, in some cases, can go up 10 or 20 times. ‘The base labeled C in thein- sert is the same correct cup Qualcomm did the exact same thing four years later from Febru- ary 1997 to January 2000. Two faulty bases failed, and the third base was a classic cup with handle that soared 20 times from the first quarter of 1999 to its peak the first week of 2000. At the initial proper buy point, PeopleSoft had 163% prior annual eamings growth rate, last two quarters of earnings were up 56% and 60%, sales were up 100% and 87%, pre-tax margin was 23.5%, and research and development was 14% of sales.How To Find & Own America’s Greatest Opportunities By William O'Neil Base is not right on this follow-through A\,, 7019174 Se Follow-through ae Base is now right to buy Base is not right on this follow-through 10/8/75 Sy 576 \ Prices are adjusted for stock splis...the actual price at the buy point was $32, not $13 Peak of handle does not get, on this follow-through ha ieee S&P 500 PS NOON Sell: heavy volume 60 without further price ———>, progress up compared to 0 2. prior week's big increase a 2 3 u 30 7" Add when back over 10-week through heavy overhead port ty © not close below ~~ Volume support 18 supply from $10 to $12 (faulty) ey ys Sneak Ins io BEBRANEEGE sar Do not buy Nyt Go not sell a NX Overhead supply “ Voume 2 N VY decline on sth lr fb 1st pullback 10 / c ° / S.veek correct cup . ae weske ‘without handle : 8 i 6 Faully cup with handle Cotiedis over 22% ! (handles normally é correct 8-12%) ts i a2 Wide and loose straight up Houston Oil iat from bottom, bad base Weekly Chart a4 30 ah 8s ah_ Distribution Red volume up from Volume dries Volume por week should not Heavier volume _ ip on pulbacks 2000000 — happen in handle on up weeks | ‘on a 00,000 thy 300000 \ +750% |+800% |+67% |-45% |-12% |-22% | +320% |+250% |+113% |+150% |+48% |+114% EPS% Chg war7a [an74 [Sepia [Dec [Marrs [an75 /Se75 |Dec75 [ware [Jun73 |Sep7e [De=76 |WaTT Date Houston Oil was newly listed on the American Stock Exchange in Octo- ber 1972 as a young company incorporated in 1966. It explored for and produced oil and natural gas mainly in Texas. From November 1972 to Novem- ber 1973 it increased 10 times in price. Notbad for anew wildcat drill- er strong in developing geologically complex properties. The November 1973 top was a climax top and your chartbegins at the far left with that peak in red tipping at $14 on asplit-adjusted basis in the second plotted week. It then drops 65% in the devastating 1974 bear market, which resulted in the very wide and loose chart base labeled “A.” That first straight up from the bottom, wide and loose base failed. Next, Houston Oil forms a second bad base “B.” The left side of this base corrects 25 weeks with many red weeks onincreased volume (normally the left sides 5 to 7 weeks and ina few-ases 13 weeks, not 25). The handle’s peak price up from the low of the base should get above overhead supply area. It did not in this case and the handle’s correction was toodeep (22%). ‘The third base at “C” is much tighter and is a correct 9-week cup without handle. The third time's a charm and is the sound base to buyas the stock goes from $13to $60. Once again wesee abig winning stock has a huge run up, tops materially, goes nowhere for 2-1/2 years, fooling people with long sloppy bases that fail and finally, in one week, pops up com- pletinga sound cup and the exact righttimefor you to buy. ‘Think about this. You had 111 wrong weeks to buy when your odds of losing were high and just one week where the correct cup appears and you can buy at the right time and make over 300%. Investing isn’t easy. You must have charts to tell you the difference between the many faulty stocks and the few potentially phe- nomenal stocks. You can learn to do this if you're really motivated and nevergiveup. When you've made some mistakes and the market's in a decline, the worst thing you can do is give up on investing, cancel your IBD subscription and chart service, and here's why! Eighty- six percent of all great stocks of thelast27 market cycles (over100 years) built their classic chart bases during general market corrections. You absolutely have to be on the job every week doing your homework to be certain you're there when the market ‘turns up and the next new leaders complete their bases and it’s the exact time for you to buy. Since early 2004, Apple formed 10 classic bases during its 5,577% advance before it finally topped. ‘Nine were built and completed during general market corrections. ARE YOU LOO}How To Find & Own America’s \ First huge volume: “oe on close below Greatest Opportunities torneekine 20 By William O'Neil Follow-through S&P.500 a i 911/95 2 \ Follow-through 2week new highs a taitarea on lower volume, 2 \ time to sell 8 a 2 ~~ Buy: High rine ones fprifian ublic offering 49 at $27 7 1s 4 +3 2 > 2oweeks se in tt : upper half for week 49 ‘on volume increase 9 Accustaff Weekly Chart ® 7 ‘Support volume off 10-week line 6 5 10-week moving te average of prices nf a8 Add ot Buy Do not sell: closes: 30 NI \ paton foaeek ine 28 : 7 on jow volume = Lec Gea Po ‘5 weeks tight 22 \ | x closes i 49 Tight closes 47 daseceeaa 2 stock spits in. ExCessne with handle short period of time Pa 13 @ QD rourore ‘Volume. low volume Youre i + ‘Support 8,000,000 Volume dies up... Low volume before breakout 5,000,000 ‘Big EPS and many quarters 3,000,000 of accelerating sales growth ‘can help justify holding 100,000 wa [wa |+0% B +25% |+139% |+75% | +167% EPS% Chg ‘sepes[Deres _[waroe [unos [sepos [Decca [mares [un95 |sep05 |Dee95 |waree | Jun Dae AccuStaff provided temporary Managementowned 26% ofthe you want to observe how Ac- staflingpersonnel tobusinessand company’s stock and Robert custaffwas a new issue that cor- government customers with 63 Bairdwasitsinvestmentbanker. rected duringa market correction company-owned branch offices Note that the stock corrected and after a follow-through day, in 18 states. during the S&P 500 decline from —_ completeda perfect cup with han- ‘The PO wasin August 1994, Ac- {UBUEE ISOS unl the market fol- dleand then rode its 200-day mov- w-through day on Dec.14,1994. ing average price line until, after cuStaff quarterly sales accelerat- > wo , cd in Il out of 13 quarters from, The stock then quickly rallied, its enormous run-up, it finally Cte thloer ariel ct oee built a tighthandle and broke out closed the week below the arch 1993 ant Mare - to new highs on volume. That 10-week line on a big volume in- Quarterly sales were up 164% began an increase of more than crease. near the stock's peak price shown _1,300% injust over one year. Maybe reading charts and fol- on the weekly chart. The compa- _Here’sarule: Most big potential lowing buy and sell rules on com- nymade many acquisitions and its bases are built during market de- panies showing big earnings and P-E ratio expanded from 26 to141 _clines — so stay on the job if you _ sales are better guides than going atthe peak. ‘want to find the next big winners. on opinions.How To Find & Own America’s Greatest Opportunities By William OM aN, waaeale \ Follov-through + 10/14/03 {The JDSU cup with handle was built as a result of the £- SBP 500's 22% correction and recovery JDS Uniphase" built a classic Sell huge volume reversal Follow-through 10/26/99 Sell: climax top (on big volume SaP 500 ‘and stock splits 170 159 140 10 120 110 100 i 0 } pF... a0 | Volume sursitos 70 after climax top, which is unusual and led to 3 more weeks in the move 50 4 A 22-week cup-with-handle base in “ the last half of 1998 due to a 22% pert jee pmecnes tat < correction in the S&P 500. The i Buy ssaitelrebounded index had a follow-through day ~ JDS UNIPHASE (JDSU) Naf criowechine on Oct. 14 as JDSU then complet- Weekly Chart = * fone ” ed its 6-week handle and broke ¥ rig Add of 10-wook = 28 out at $7 (split-adjusted) and ; $ e moving aeorege ine: soared to $152. It never closed a .. 2 week below its 10-week-moving- Tight cioses average line until after its $152 7 0 peakinalittle overa year. ye 10-week moving 7 Now,howdoyou find such anin- average fine contains 18 credible stock? You learn how to \ “ spot a cup-with-handle chart pat- cat 2 tern, the most common pattern of " big winners that has been repeat- Closes in upper half 10 ed dozens of times during every for the week 3 OK Add off 10-week ss 8 moving average line Sel: huge ; Normal puilbock to buy point, Yo) ang c ada when crosses back over ck spits ‘Dsweek moving average line Volume has. Sen 3 stock spits in continuous zaeweek cup less than a year increase dunng an @ af Gy wroemove Volume dry up just before ‘Volume up Volume big move up begins \ on gap up Weekly Chart Closes mid-range for 19 week and above the 17 10-week line 6 4 PN Pullback fils in gap area 73 Base-9r- | and then stock goes up 72 ase "1 8 weeks in a row 10 Buy : i 8 TN act febound ? off 10-week line ' Flat base ~Supported 5 times We at 10-week line 5 48 42 the S&P 500 rolled over and made new lows, but Southwestern did not. It diverged, building a flat base going sideways seven weeks and creating a base-on-base that was supported five times at the ended with the S&P 500’s top in © 10-week movi e line. All 2007. of this required a lot of patience, 47 18 = ts tn Big volume spike ‘Volume: upon prior uptrend Volume up : t0 cup with handle \ 20,000,000 \ \ ‘nan 6,000,000 i li 3,000,000 #261% |+385% |+140% |+34% |+108% |+143% |+114% |+31% |+33% |+87% |+53% EPS% Chg Jun03 | 8ep03 [Dees [Maroa [una [Sep.08 [Dee04 [Mer 05 [Jun 08 | Sop05 _[Dec05 [Mars Dato Southwestern Energy was a big market leader in 2004 and 2005, engaged in the exploration and production of oil and natural gas in Texas, Oklahoma, Arkansas, Louisiana and New Mexico. The Houston-based company alsodis- tributed natural gas through a 5,400-mile pipeline. Southwest- ernhad provenreserves of8.5 million barrels of oil and 594 billion cubic feet of gas, plus it held 924,000 undeveloped acres and 247,000 developed acres. Its earnings turned up in the first quarter of 2003 when a new Southwestern Energy formed a perfect 13-week cup with handle in early 2004 when it corrected six weeks down to the top of a prior flatbase. On thatsixth week, volume continued above average but the price closed down much less than the prior week’s col- lapse. The stock also closed more than 40% above the week's low, a sign of institutional support. Tt then rallied to within 5% of the stock’s peak and created a tight handle with the last week under- cutting a two-week earlier low and the next week breaking out. It moved up just four weeks and however. The base-on-base is a super-powerful formation because the stock is holding up, making a new base at a higher level while the market keeps going lower. Southwestern diverged again in July 2004 and built still another base-on-base in March and April 2005. Keep these examples so you'll remember that base-on- bases are not stocks that can't seem to get anywhere but are stocks refusing to go down and just waiting to surge to new highs and race ahead asthe general mar- ketstartstoturn up.How To Find & Own America’s Greatest Opportunities 718105 Follow-through v\ Follow-through Follow-through jew i igh serene low volume 5/4105 \ "| 150 By William O'Neil 7 130 Wedging up ~ w on low volume ino Follow-through 100 SaP 500 Follow-through 8/16104 uy: 10-week ° 5/25/04 double bottom Nf / wh ~{ / oo Te Sell: close below a Intuitive Surgical develops an ad- Do not buy: Buy to-week line on 4 surgical system designed late stage base big volume gy toimprove minimallyinvasive sur- Sell: breaks upper Do not sell: gery. The system translates a sur- channel line low volume io geon’s natural hand movements “6 ‘on a console into corresponding 2 micromovements of instruments bod positioned inside the patient 3 weeks “4 “ms ight closes, through small punctureincisions. / Buy back @ $26.35 the amount . Stalling action sold plus a Ittie more due to gap 26 I] ep on +2424 og €P report A Do not buy ‘and volume up over 366% a o Donet buy above average daily volume \ \ 19 outofstock when closed =. | Peeing, below tOoveek ine on is 10-week line on Volume, must buy back Relative Strength Line 13 huge volume the next week ~ vs. S&P 500 2 pl " Handle area of base wescing [VW 10 up along weekly ions isa AY ; key fault of a stock that vv sorrected 46%, much worse INTUITIVE SURGICAL (ISRG) °* than the S&P 500 at the time i ¢ Weekly Ch ( ) A oy eekly Chart A. 8 een ake [ Relative Strength Line gets new high i \\ 7 around as S&P £00 is making lows 5 Sedge WoO i 46 \/ A v Even greater volume. Me i sia “ Largest weekly volume Volume Huge negative since stock's IPO in 2000 volume close 8,000,000 5,000,000 \ 3,000,000 +,ano.0o0 MEET I wa _| +129% | +117% | +100% | +2425 | +700% |+1150% +180% | +204% |+126% Eps %.0ng Janos [Sep0s[osc0s [marca [iunos |Sepos |Dee0s _|ttaros [unos | Sep05 _|becos _| ards Date ISRG had its initial public offer-_ handle area wedged up along its _ s:p 500 corrected tonew lowsin ing of stock in June 2000, just weekly lows. The second cup July2004,akey signofa powerful prior to the prolonged 33-month with handle (at point B) was nota divergence. Volume dramatically bear market. The IPO at $9 quick- lyjumpedinsevenweeks to ahigh ‘of $38 and promptly nose-dived to $6, tracking the general market’s cave-in. It then moved back and forth, unable to make real progress from a proper base until Tune 2004, After several years of mediocre performance, it built three bases beginning in June 2003. The first two failed and the third one broke out and advanced from $18.60 to $139, We'll point out the reasons the first two failed and the third worked, which are things you can learn to recognize as you get more serious about good chart reading. ‘The first cup-with-handle base (at Point A) was faulty and wide- and-loose (a 46% drop), and the base-on-base pattern because it did not stop and build a base on top of the prior base (at point A). More important, itbroke down on. huge volume 400% above its weekly average and one day hada 1,700% increase above its daily average volume, giving the base more distribution than accumulation. Finally, the handle area did not driftdown, When the firstand second base broke out to new highs, the Relative Strength line lagged and did not make a new high. The third base (at point C) was tighter and proper, not as deep from peak to low of the base. For the first time ISRGs Relative Strength line vs. the S&P 500 led into new high ground while the increased aswellastheprice. Both history and human nature relentlessly repeat in the Ameri- can stock market. Microsoft had three long sideways bases from October 1987 to September 1989; the first two failed, the third advanced six times. PeopleSoft did the same thing from February 1993 to August 1994 and then advanced four times. Qualcomm moved sideways more than a year with the first two bases failing. The third took offin January 1999 and soared more than 20 times in one year. Could it be worth your time to study historical charts and human nature? Do you think some stock could be repeating history this year or next?How To Find & Own America’s Greatest Opportunities By William O'Neil ‘Sell: stall on i {he huge volume -/p.4./ Sel no cemand 38 10 : : stock makes new 100 : Felow-through high on low volume 0 Foliowsthrough 214/04 ; ii 73164 Do not sell here ° distance from second 7» to third plot pont of channel ine must be x0 [more han 6 weeks Steck breaks out. Break out : 0 ieee le eR ad positive Sel: reverses from ie through in S&P 500 stock base .. e@mings report new Tigh on nige 2 with accelerating volume ps and sales % ’ x QUINTILES Se He ight closes \: 20 Weekly Chart Mott coses | 7 | i f oa itHold Gosesin 2 up over 20% intrsts ~~ AGS . deere arias Hostetbanerant weeks mustholators weeks Zrimary errs qverage line. Now you can scan full weeks then = atg29 every weck looking for these clas- re-evaluate progress, Seveek Add: bounces sic patterns that have been repeat- Pees ot 10-week line ed every market cycle. + \very tnt ‘Weeks 3 and 6 close up for the week with increase in volume Weeks 9 and 11 have heavier volume with no further price progress down, signs of institutional support area, sign of acoumulation Chart prices are adjusted for 2/1 split. Therefore. first buy was $19 at the time, not $9.50, and second buy was at $28, not $14, etc Once you spot a few success patterns each week, check the key fandamentals:big increasing quarterly earnings and sales, high return on equity or pre-tax profit margins, what products they make orsell, the general marketin an uptrend. Once everything seems to check out and you be- lieve you'reright, the chart's right and all the fundamentals are 44 Ot): Stall | 40 Voume | are ie very light Price and semeco EPS growth at Volume volume up \ r so%andsaes [19 | wo 990000 growth at 61% yl 580.000 before breakout iN soneee l 200,000 414% [750%) |+43% | 410% |+38% | +44% | +50% |+55% | +73% EPS% cho Mars |Jins4 [Sep 94 [Desa [Mares [un95 [Sep95_[Decos [Mar96 | wun86_|Sen96 [Deo 86 Date Quintiles provided pre-clinical research-and-development servic ¢s to the pharmaceutical and biotechnology industries. That in- cluded clinical trial management, clinical data management, bio- statistical analysis, centralized clinical trial laboratory services, study design, regulatory affairs services, pre-clinical testing and health economics consulting services. The company made many overseas acquisitions in 1995. For- eign operations accounted for 38% ofsales. Quintiles had its IPO in June 1994. How do you learn to find and own America’s greatest stock opportunities and hold them until a proven sell rule tells you it’s time tosell? There are relentlessly dozens of these new great winners every market cycle! You need a system and a routine, a pre- scribed course of action you use and follow regularly every week. Here’s one way youcould do: A) Save all of these historical models of big winners we've marked up. Save and file them in order of the date of the first marked-up buy point. This way you'll have all the classic greatest ‘winning pattems at the start of their greatest move and in order ofdate ineach cycle. B) Get “How to Make Money in Stocks” and read it twice. Now you will have many models of exactly everything you're looking forevery week. ©) Subscribe to a weekly chart service, any one as long as they have lots of price and volume weekly charts on a logarithmic price scaleand.a10-week-moving- there, it’s decisiontime. Put amar- ketorderinwith yourbroker. If you buy 10 stocks over the course of ayear, you'll probably be right, if you've done your homework well, two out ofthree times. So you may be right six or seven times and wrong three or four times. The seeret is to cut your losses short so you never let yourself get hurt badly when you're wrong and make up for the small losses when you're right. One method is to learn to cut all losses when a stock is down 7% or 8% from what you paid and sell more of your stocks when they are up 15%, 20% or 25%. In aroaring bull market, maybe one of your 10 stocks might be able tomake 50% +0100%, but don’t getstarry-eyed, carried away or greedy. A bird in thehandis worthtwointhebush.How To Find & Own America’s Greatest Opportunities William O'Neil By Sell: breaks upper 499 : Followthrough __Follow-through channel line Follow-through 118/91 7/8/91 F & m 5/11/90 SP 500 Follow-through 140 Follow-through toriergo to a0 is 109 4 ~ uw a low but stock holds above its August low United States Surgical Corp. pio- i meses neered the development of surgi- 4woeks closes in handle = cal staples in the U.S. These re- tight area of cup 6 duced patient time in the operat- 2 ing room, trauma and blood loss. ~ 8 ‘These factors facilitated postoper- -! i bebe a ative healingand shortened hospi- Buy ‘Add: bounce off 0 talstays. \ ‘10-week line on above 8 a i Inthe late’80s, doctors beganin- _: ete oe serting surgical instruments _’ LS Add: big volume off 10.meek line 2 through disposable, tubelike de- Breakout week with 2 \ 12 weeks up in a row ‘Shakeout week: closes at peak with very little price change and increase in volume of 3 prior weeks having big volume clues UNITED STATES SURGICAL CORP. Weekly Chart and base-on-base is being created (correction stopped at prior base's pivat buy pcint) 476% #23% [423% |+23% |+38% |+31% |+4d% |+69% | +67% +87% —|+78% EPS % Chg “un89 | Sep89 [Deca | Mers0 [un 90 | Sep90 [Dee 90 [Mar 91 [uunes | Sepe1 _[Dese1 [Marsa Dae vices that opened the door tolap- for $57.5 million. From the first one or two medical stocks thatbe- aroscopic surgery. U.S. Surgical’s “Endo Clip” was introduced in 1990 and enabled laparoscopic gall bladder removal. The laparoscopic procedures required smaller incisions, were less invasive and also reduced hospital stays with faster healing. By 1992, half of thecompany’s$Lbillion inreve- nuecame from sales of laparoscopic-related products. USS. Surgical marketed its prod- uctsin the US. and 64 other coun- tries. The company repurchased 4 million shares of common stock buy point coming out ofa 19-week cup-with-handle base in April 1990, the stock increased 785% in 94weeks. Earningsandsalesin the mostre- cent quarter, before the first buy, were both up 23% and accelerated for the next five quarters. The P/Eratio began at 22 and ended at 79. The number of mutual funds owning the stock doubled in the two quarters prior to the initial buy and materially increased in six out of the eight next quarters. Every bull market typically has come new market leaders that last for 1-1/2 to two years. Most do not repeat in the next bull-market cycle. That's why it’s wise to use, and follow, proven sell rules to sell on the way up when you have a significant profit ... while you stillhaveit. It’s better to have rules than to go by how you feel. Jesse Liver- more said, “There are only two emotions in the stock market: hopeand fear. Theproblemis, you hope when you should fear and you fear when youshould hope.”By William O'Neil jna\ ‘American Power Conversion designed and manufactured uninter- ruptible power-supply products for use in personal computers, work stations, file servers, communications equipment and other electronic devices. In the case of power failure, its products provided a temporary and imme- diate source of power until back- up or emergency systems could take over. This would safeguard Follow-through How To Find & Own America’s Greatest Opportunities Follow-through Follow-through Follow-through 40/15/91 ane Follow-twrough 718/91 5/11/80 \ \ er Follow-through sarte/90 made its hugerun. Notice how a stock’s base pattern is formed because of the general market (the line above the stock's weekly prices is the S&P Do not buy: porous NG LA coon [Ee]; handle a 2 Buy / NPY 0 iAP Add: goes I" F back above 13, 7 eonee | Toeekine flat base Tech stocks tend to have more pullbacks and shakeouts making them harder to handle. g Therefore, you must really know the company well to sit Stock had ts ise i threugh the numerous ests. g Dil pk a ~y Pullback B end of the week corrected 26%, ‘Add: pounce off “ore than normal that's the process that creates ‘week moving 5 average ine handles bases for thenext big marketlead- ers. So learn your general market XK AK POW rules and your individual stock AMERICAN WER buy ‘and sell ules to be in hase 4woeks “~ 1eweek ous ~- CONVERSION (APCC) ~~ with og 7 with what's happenii tight closes with ance Weebly Ch: appening, feekly Chart ‘The first18-weekcup-with-han- Bien 1 clue Big volume ferscck spt, : : demand : 1s (Gs) a a ies ~ i, % 1,680,000 | e000 seo. 0900 200000 +07% —|4125% [483% |+40% |+80% |+4a% |+36% [449% |+67% | +62% EPS% Ong un 80 [Sep 20 [5c 69 [ar s0 | 90 | Sep 60 [ee 8 [ware [unoi [Sep 01 [owes [ware Date equipment and data from potential damage and loss. APCC bene- fited from the rapid growth in the computer industry and government defense business. At the first buy point, annual earnings had been nearly dou- bling for three years from 4 cents to7 to 16 to 30. Inthe two quarters before the buy point, earnings jumped 125% and 83%, whilesales ‘were up 120% and 86%. Annual pretax margins were at 26.9%, return on equity was 50.7%, and sales were up more than 100%. All of this happened before the stock 500) and once the S&P hits a bot- tomand begins an uptrend, stocks will break out of sound bases. The depth of a stock's correction in most cases is affected by the de- gree of decline in the market index. The depth of the eight-week flat base that broke out in October 1991 was less than the decline in the first two base patterns in our example due to the greater declines in the S&P 500. Don’t ever get thoroughly discouraged with investing when the general market is in a correction, because dle base was classic. After round- ing out along the bottom of the cup, it ran up five weeks in a row with volume and then pulled back two weeks on lower volume to form ahandle in the upper part of the whole base. The next week it broke out on March 7 with the day’s volume 410% above its daily average. The stock then increased. ‘more than 800%. P.S.: The IBD stock tables show the daily volume % change for all of its stocks and boldfaces those that trade +50% or more for the day.How To Find & Own America’s Greatest Opportunities By William O'Neil Follonsthrough 8/15/06 \ Mosaic was the No. 1 maker of phosphate fertilizers and it was No. 3 in potash fertilizers world- wide. It wasa turnaround stock in ahighlycyclical industry. Tobe ahappy investor andmake a substantial profit in a newly uptrending market, you must be quick on your feet to spot and buy exactly the right stock at the right time — one that has outstanding fundamentals and an exceptional new product and story you under- stand. As this stock continues to go up after your buy, be prepared at some point to hang on through two corrections of 15% to 20% in this stock that you will probably be holding over a period of five to six months, 12 months or in a few casesupto17 months. aoe you must sell all of the ZL. iN Hate Follow-through 2 3/21/07 “ 7 Follow-through F ojgythrough a S&P 500 break: Do not buy largest 2 volume weeks of base were down weeks 220 S&P 500 100 t 170 1560 1/28/07 to new lows Do not buy sales 10 Sell on 47th week since first ‘N 120 buy: general market, after 10 100 ‘one leg down, rolls over and breaks to new lows Donot buy: less gp volume on new high than prior week and straight 79 up from the bottom Do not buy: new i 6 high on very low “Add: bounce off volume Buy 10-week moving -: 50 average line on 4% volume increase Buy: ascending 2 base (A, B,C) After 3 shakeouts at 8 new lows, stock is 34 93 7 Now ready to advance o IV c 2 Buy Yow 2 NfTe Add bounce of Word to the wise: stock 24 i 4 Hanes me ‘drops from $163 to $22, 29 Weekly Chart A average line on Volume increase 1141 points in 23 weeks! Learn when to selland 19 take a good profit a MOSAIC COMPANY (MOS) 15 Largest volume reeks in base 3 weeks of big mi 1" ‘alimne buying sie at dn 7 ‘support around, weeks ° t0-week line | V1 = | seenn i : 8.000.000 7 HW 4.000500 2.000.000 +533% [WA |-73% |.20% |+15% |+120% |+007% |+386% |+440% |=1040%] EPS %0re Deccs|earce anos |ep0s [tee os [aor [1una7 |Sepo7 [Dacc7 [waros [unas [Sep 08 Owe stock on the way up after it re- sumes and continues its advance. You will use your predetermined, historically proven sell rules to spot when your stock’s price action tells you it's now exactly the right time to sell based on one of your proven sell rules (not how you feel, what you think, want, hope for orareairaid of. It’snoteasy, ittakestime, butyou can learn to do this if you have a strong desire and are determined. On the chart, note the three big volume clues in the nine-week base at the first buy. At point A. B and C, you had an ascending base that corrected three times with each low made at a higher point. After a stock has about doubled, three weeks is not a base, and a July 2007 new high on low volume is a do-not-buy sign. After three shakeouts to new lows, the stockbroke out again from aseven- week base in August 2007 for another move up. Along its move we had twoadd points where Mosaic pulled back to or around its 10-week moving average. ‘Then, when you're as happy as a larkand sure your stock will keep moving up, you get and act ona key sell signal. The S&P 500, which had already gone througha sharp correction in October and November, rolled over after a weak rally at the end of Decem- ber. By the first week of January, there were seven distribution days and the market broke to new Jows on acceleratingvolume. Late that year the stock ended up at $22, but you were out at close to $100 witha substantial gain. ‘You can’t go by opinions or how you feel. You need to have and fol- jJowsound, proven rules.How To Find & Own America’s Greatest Opportunities By William O'Neil ‘We live in the greatest country in the world, How did it evolve? The U.S. system, that’s how. It’s your freedom of speech, religion and press. You are free to own property and keep arms. Every citizen over 18 is free to vote in elections every ‘two and four years, and replace weak or failed leaders. You are free to work, learn, create, inno- vate and invent because of our wayoflife. Weare a nation of innovators because of these freedoms. Our GDP per person is larger than any other major country. ‘That's why millionsof people continue to come here to participate in our exceptional freedom and opportunity. Nothing can hold you back except your own atti- tudcor level of determination. Sell ~ climax top: 10 : + 30 days up in a row, up ry 28 40% on 2nd spiit in 26 last 6 months: 24 bly missed these life-ch: i 2 ly missed these life-changing op~ portunities in the past Its ME OD"3 weeks tight closes, e uptime. Keep these examples. ‘This is by far the best way to im- 7 prove your skill in finding the top innovative newer companies. as These patterns and great 4 mental numbers will be repeat- 3 ed again and again, and be 2 priceless models to guide you A. 1 in each new market cycle. 7 ‘The stocks may all have if 10 newnames, but the highly tt/ 2 successful facts and pat- ttt ternswillbe thesame. t/ i 8 Why did these super / You have to buy using rules, patterns and facts occur in all of our at / fy th pan ‘Add base only corrects 10% L Pri con hold using new rules, and sell ~~7 based on selling rules...no opinions, emotion or ego 6 ‘Today, nearly 50% of Americans 1 46 invest in our stock market, either i in their 40104)s, individual stocks, | Add first pullback to 10-week 42 mutual funds or pension funds. A....moving average line of prices 3 However, whether still working nde or retired, most are not highly : 34 skilled investors, as this takes 30 time, workand study. “= View buy point ae f c [44 5 weeks tight closes ze . f va shows positive accumulation Up 20% in 4 week must hold ’ Cup base 8 weeks and then reassess H . 22 ~~ lome Depot (HD) End of 8th week from buy, HD now Weekly Chart 49 Buy point after 3 tight up 47%, so can hold until closes eekly Uha weeks and volume — fq]. week below 10-week moving average 47 dryuponcomecton ton big volume or has a alimax top fl Huge volume In 2004, Google IPO (demand) Low volume 47 Volume Tepeated the same pattern and buy point 4 Big volume on decline Ne +100% | +100% | NA +s0% | +100% | +350% | NIA +100% | +50% EPS % on indi Sep8t Dass ware | iune Sepa | bee imar63 | kn63 Date In every new market cycle for _ last27market cycles? market, they had a public offering more than 100 years, innovative _ With all the changes and prob- _0fHomeDepotstock. companies continue toleap on to lemsinthe world, threethingsdo _ Here are the vital fundamentals the scene and become outstand- notchange,especiallyintheUS. __ available to everyone at thattime: ing new leaders. So you must 1) The law of supply and de- LastQtrEPS +500% learn how to, early on, recognize mand. © AvgSales Lasts Qtrs_+180% and capitalize on our never-end- 2) Humannature. @ After TaxProfitMargin 4% ing parade of amazing opportuni- 3) Thedriveandunrelentingini- @ ReturnonEquity 28% ties. tiativeof ourinnovators. @ NextYrEPSEst over 100% Each Wednesday, Tllcoverinde- Here is my first example oftwo _@ P/ERatio 36 tailone ofthese remarkable entre- preneurial stocks whose price soared 5, 10, 20, 50 or 100 times in the recent past so you can learn the key factors to look for in fu- turenew leaders. ‘Also, you'll learnwhy youproba- creative entrepreneurs: Bernie ‘Marcus and Arthur Blank had just been fired from a hardware chain sothey decided to starta new type hardware store named Home Depot. In 1981, in the middle of a bear Home Depot soared 1,600% from the buy point to its climax top sell point in 1 year and 8 months. In the future, you should always check out any great new company where you{iketo shop. Y(How To Find & Own America’s Greatest Opportunities By William O'Neil PRECISION CASTPARTS (PCP) Weekly Chart Follow-through 3121107 Follow-through Follow-through 19/19/05 Follow-through 3114108 Follow-through 8/15/08 /\, S&P 500 ‘Sell Stallingon | BB a ; 220 514105 heavier volume and ‘ 5 breaking above 190 ar yee 1A. £1 upper channel tine 170 Oo . ; i 140 : : 130 ‘Add: big eamings ie report, up 75% ree ip 62% | Add: 3 weeks ‘Add: bounces off 100 with volume up «tiohtcloses gAff@——0.week ine on volume gp Avoid shakeout ; ‘Sell all: closes well» Early buy o\ iT scoes in upper » at $61.45, below 10-week line half by week's end 70 : S.weeks —_o7 big volume tight closes: fe ‘ “ ‘Adc: bounces off 60 j Normal pullback | 10-week line on Add to pivot with volume 80 Buy: volume up on, oe jower volume ~ eed 46 day of breakout 20-weekKoin, 2 Do not buy: 3 weeks with handle ional js 4 38. of attempted breakout Handle drifts down ‘{Faveek saucer” With poor volume along lows and corrects u <-te- with handle anda <-----! co hhctichstil. 12%, creating a classic 1 0 lot of ight action : : fcumwrehihandle: : : i : : Rat . : i 4 i : : i b 2 : i : ft 4 i b 19 Big volume clue: 103% New highs 7 5 0 cay ine, sj ial volume on _YOIUM® Closes below {f (By ana cones near ts peak coe down weet oc] Stamos at ‘on volume Big vorume Volume up as 3 Heavy volume . Velume cue: ue 99PS UP Door volume without further price A progress down nen 000,000 8,000,000 1,800,000 +51% |+53% |+37% |+38% |+3e% | +a3% |+75% |+71% |+92% |+o0% |+62% EPS % Cho Mar05 [wun 0s [Sepcs [Dec0s [Mar0s [unos [Sep 06 [Devs Marc? [vund7 | Sepo7 | Decd7 Date Precision Castparts manufactures castings, forgingsand fasten- ers for the aerospace, industrial and automotive markets. General Electricaccounted for 11% of reve- nue. Here is acase where your stock was bought correctly at around $40 and the first sell was based on therule to sell when astock closes for the week below the 10-week moving average in big volume. It traded with 72% higher volume than average that week. The prof itwhen sold was close to 20%. It \ was not bought back, as you can see on the chart, because it showed continued adverse action weeks later. Finally, after 11 months, during another market correction in the S&P 500 index, the stock built a classic 20-week cup-with-handle base. It was bought back at $61.45 with additional follow-on buys and ultimately sold at $138 the first week of August. It was sold because after a long price run-up the stock made new highs for three weeks and stalled on heavi- ervolume, From a money management point of view you must realize the initial sell gave youeleven months to use the dollars from the short- term profit to find another pro new base to buy over the next five to 50 weeks, And many months later, when Precision Castparts went through a 24% correction and built a perfect cup with handle, you could then sell the new stock or its replacement to buy back your Precision Castparts, which then proceeded to double over the next 46 weeks. It’s called the time utilization of money. To do this you need both good buy andsellrules.How To Find & Own America’s Greatest Opportunities By William O'Neil Do you like to see movies? Do kids like movies? Sure. A few years ago, I did a study of themes in the market that occurred in nearly every cycle. One of the five recurring themes was the leisure andentertainment industry. For example, in the late ‘50s, Diner's Club created America’s first credit card, Brunswick's new automatic pin-spotter set off a bowling boom, and Polaroid’s new “picture-in-a-minute” camer- Seil after lon; never stopped to think and buy these stocks that increased in price3,10, 50or 100 times. ‘And this was just one industry sector in America! There aredozens ofother sectors. They too had exciting new leaders pop up in newmarket cycles. Every Wedne: day, Fl coverinde- tail how you can learn to recog- then goes straight back up to ew high ground in 2 weeks. 1g Tun up to new highs and drops | 599 2 wks straight down to 10-week line, i 280 s aan “ 240 m0 4 weeks is not @ base! 2weeks later, red volume increases above average | ‘Add at 109 afer shakeout below July low of 103 on. July 1, when NFLX then Tecovers 6 points above 103 low on 94% volume up that day asgave people instant photos. nize the many Vout potorh * Then in the ’60s came all the future _out- payble power Deve color TV stocks, Disney, Winneba- re # + pt 0 go’s motor homes, and Mc- Addon gapupat Donald’s fast food inthe ’70s. This ~-61 on huge volume ~ 4 fecbectecbeenberbcten TO Can’t Be Yogurt and International 10-week moving Game Technology’s computer- average line of prices i is ized casino gaming were new in- novations of the’80s and 90s ‘Add as stock bounces i Lit Lb “as off 10-week moving I average line of prices Do Not Sell! Closes week in + + + a } top half of week's price range. i L ie Buy - price up 15% Sign of support, ! do 88 on breakout day. Sweeks i L L 6 ‘| ~ ight closes. t ue 21-week Sead ach 1 i a i pi ae cup with handle .6 weeks 30 \ {ight closes L i E ° Closes week below 10-week line but on 4 . Netfli fae pmefannt 26 less volume than prior week and only 92% ettlix : above average, Next week is down but _ Weekly Chart if ‘on less volume and closes in upper half Tort T rt nee cof weekiy price range. Supporting action a +-—-+-~ Volume up 266% on day stock + en: 19 rebounds off 10-week line + + Sell volume 18 Treweek Volume up 543% i Voune | cup with handle on buy day i 14.000,000 i 7 acco 009 44,000,000 | sno +36% | +56% | +61% | +20% | +44% | +37% +36% | +55% | +88% EPS Chg Sep08 | Deco8|naros | vinos | Sepa | Dace Sepi0 [ose [Warts Dae forconsumers, standing big leaders that in the _ thefirst Netflix purchase: More recently we've seen past may have been right under 4yearsEarnings PerShare Apple's iPods, iTunes, iPhones your nose, but you never capital- $0.33 $0.82 $LO1 $1.44 and iPads, Priceline’s “name your ized onthem. *2008Cash Flow $5.67 own price” for vacation travels, We'll use fundamental rules, ¢Returnon Equity 23% and Hansen Natural (now Mon- charts and historical precedents» PretaxMargia 10.5% . guide you to, perhapsin time, fi- These new innovative leisure nancial independence ... if you * Pst3 Quarters BPS companies all had stock available work atitand not let yourself be- Sal that soared from 300% to as high, comediscouraged. ‘Last 3 Quarters Sales in some cases, asa mind-boggling The more you learn the facts of _ *H%+10%+19% = 10,000%. past innovative leaders the more * straight quarterswith higher People old enough to have lived you'll be able to recognize the umberoffund owners during some of these periods will _nextcropof winners. They willbe _*7 announced buybacks of remember many of these compa- there, so never give up... if you _stockinlast7 quarters nies and will have used many of want to succeed. Here are the *RelativePrice Strengthat new their products ... and yet they vital fundamentals at the time of _high8 weeks priorto breakout. wy How To Find & Own America’s Follow-hrough 2 . 10/18/59 Market starts 260 Greatest Opportunities \ pees By William O'Neil aah ‘0 Dow Jones Ind. hi 170 : \ Follow-through i 7 150 Follow-through H P 6/7/69 140 42134157 Follow-through 130 . asso 2 0 ‘0 1] Sanh sock Sones ay — below 10-week line with volume up and general 0 fh market i topping 10 wo ; ‘Seek cup / with handle 50 Pokus _ 46 J 2 JIN. Ada: first pullback 38 fo 1oneok moving 2 average ine 2 S 3 You needa pir Bt uptrend of at least 30% ! 2 with strong volume for | ‘10-week cup the bases you buy wih handle. nee i; 9 is { | FAIRCHILD CAMERA w AND INSTRUMENT 8 Weekly Chart 4 2 a © : 4 7 ‘kav iscsi on prior uptrend Volume up; Volume UF Gy) volume up | ? \ \ ‘ 13000 +87% |+950% |-450% |-66% |-5% {F4ai%) (282% B +19% |+93% _[+107% EPS% Chg Sens? _|Dess7 [Morse |iun68 |Sepse |Deose |Morso |uun60 |Seps0 |Deo6 [Moré [unG0 [Sop60 Oto Fairchild Cameraand Instrument wafer of silicon, creating the jropertimetobuy. hadalonghistoryinaviation,cam- firstsilicon integrated circuit and PIDPUTUUE™ We eras and instruments with multi- “Silicon Valley” wasborn. oustas ‘keeth nt ast) eh . le long-term military contracts. ‘The innovati tdirectly to | “ghtstock attherighttimeis hav- P 7 ¢ innovation went lyto ing sell rules and applying them In 1957, Sherman Fairchild fund- eda new division called Fairchild Semiconductor in Mountain ‘View, Calif. The idea wasto usesil- icon in electronic components to bring downcosts. In 1958, it developed a planar process which was a huge breakthrough in transistor technology, bringing down costs while simultaneously improving performance. This eventually led the company to build a circuit with four transistors on a single the bottom line as earnings growth turned around in the quarter ending December 1958. In Feb- ruary 1959, the stock had just formed a 10-week cup-with-handle and the market staged a follow- through after a 3% correction. The stock broke out on the day of the follow-through with volume up 200% above average. With an innovative product, strong earnings,a market in an uptrend anda sound chart pattern, this was the unemotionally. Learning to read charts can be invaluable. When the stock topped in 1960, it could have been easy to justify stayingin- vested. The earnings were still strong. After topping in August 1960, Fairchild corrected 35% and formed a long base over the next year, Butitnever broke out of the base. Don’t anticipate a breakout in hopes of saving a few pennies. Fairchild eventually corrected 80% before bottomingin 1964.How To Find & Own America’s Greatest Opportunities By William O'Neil Skyline Corp. manufactured mo- bilehomes, alow-costhousing al- ternative. The industry had increased sales in the prior three years at arate of 25% per year. Coming out of the 1966 reces- sion, 1967 was the first year of a new bull market. The entire mobile-home sector led the second year of the bull market in 1968. Champion Home Builders, in January 1968, ran counter to the 11% general market correction andbegan an 8-fold price advance over the next 70 weeks. Redman Industries zoomed up 9 times in only 12 months. It emerged from a classic, powerful 13-week cup-with-handle base. Redman's Sell on 3/1 spit and run-up from 2010.27 J add @wesks up ina row / JL Aad at 10-0 fine 3 weeks tight closes affer 3 weeks tight closes i ‘Add st pullback to 10.¥k tine Sell rules if stock advances and you're ahead 4. fa climax top happens Jot> 2. If stock closes week significantly below 10-week , moving average on huge volure REBES FERS If you missed the 1st base at ‘the buy point in late ‘67, you {got a 2nd chance with the base in March '68, plus you now had 3 big quarters of ‘earnings growth that ‘averaged 100% per quarter. first two quarters of oN ‘That's why Skyline bolted up 4& bo nearly 5 times injust 45.42 ‘weeks from the orginal base. 38 chart base 34 i 30 t eo Skyline (SKY) t a |S Weeks up . Weekly Chart ! i 24 inarow I 22 \ i i i 19 aE 6 weeks up i Stock prices adjusted for two! 7 inatow 3-for-1 spits. Actual price at 15 : fod ‘st buy was $45 in late 1967. - 14 Huge volume out of 3-for-1 splits are excessive 13 10 big volume spikes up means 2nd base and after and a selling opportunity ae big demand in prior uptrend 200% eps quarter Gh) 4 Huge volume on close Vaume i |Buy week: below 10-wk tine | cane | volume \ | | L 4 300,000 | 140.000 60.000 20000 1 -50% |-50% |+50% |+50% |+200% |+500% |+78% | 489% | +111% |+150% |+ea% |+47% | EPS%CKO Decté were? [une7 [Sep67 [Dece7 [Marea [un68 |Sep63 |Dec6s [Maré9 |Jun69 |[Sep6s | Dae earnings turnaround were up dynamicmarketleaders. Key facts on Skyline available at 200% and 800%. We'll cover Red- man in detail for you a few weeks fromnow. Beingin acyclical industry, Sky- line's earnings tumed up 50% two quartersin a row back to its previ- ous peak. Note the 10 huge aboveaverage volume spikes during big price up weeks, showing a powerful prioruptrend tothe base inDe- cember 1967. The lesson here for you to learn is that every single new bull market for the last 100 years has had 10 to 20 or more new innovative You can learn how to spot the best future leaders if you save each example I'll mark up each Wednesday for you. Why is that? Because the names will be new, but the big numbers in earnings, sales and price and volume patterns repeat themselves over and over again. You will learn exactly whatyouneed to look for. Why not have some fun, leam a new skill and capitalize on the great opportunities that America createsevery cycle? thetime for everyone inlate 1967: Industry saleshad grown. 25% per year in prior 3 years * Current EPS up 50% last2 quarters * Huge accelerating weekly volume demandin prior uptrend ford quarters © Price always gotsupportatits 10-week moving average line on thewayup * Weekly chart services were availableto help youspot basic patternsHow To Find & Own America’s Greatest Opportunities By William O'Neil Pic ‘N’ Save was unique at the time inhowit acquired itsinvento- ry, Its specialty was buying over- runs by manufacturers: products with minor defects or that were a little out of fashion. It would buy its products from companies look- 8 ing to unload merchandise in a large quantitiesat bigdiscounts. 0 Therefore, any time you visited ‘\ a 2 its stores, you would sce some- ¥ a sap500 3 Follow-through 2 Follow.through 42/69 \ Follow-through 4 \ 9 r 19 6/5/79 Veli :. “pt ? hE “yf MEN oe tt % = : see ied apt When S&P 800 ends is 1? conection in August Buy, “y Bsc tight closes 1982, Pic‘N’ Save triples in price again...stock had increased 10 times since ..g August 1979 ; 8 Buy B.week cup PIC 'N’ SAVE 5 NY pinihianail) Weekly Chart 46 g ‘Add off 10-week = moving average 7 line on volume ae Stock spit could 18-week cup be a chance to 28 waiiende, Volume up huge recuee position 26 cn breakout 2a @ y \ Voune \ Lyd cd snr Nl R 160,00 | 80,000 | «000 +57% |+56% |+a0% |+33% |+55% |+20% |+37% |+55% |+20% |+20% |+17% EPS% Cha un70[Sep7s [Dee 70 [Marad [wna [Sepe0 [Dee @0 [Maret [uni [Sepei _|Dscei_| ware ete thingnew that the store never carried before, and at bargain prices. Since Pic ‘N’ Save was buying its merchandise for pennies on the dollar, it could mark its products up for a good profit margin and still provide its customers with bargain prices. You could even buy little kids’ shoes for just a few dollars. This strategy directly translated to strong numbers for the company. At the breakout shown on the chart, quarterly ‘earnings were growing over 50% and the annual return on equity was over 30%. It's this kind of growth that gives you the convic- tion that you might have abigwin- neron your hands. ‘My wife was actually the one who gave me this stock idea. It’s OK toget ideas from other people, but you never buy just because someone else tells you about a stock or gives you a tip. You need to thoroughly research the stock ‘on your own so you know how to handle it properly. That way you are making decisions based on facts andnotopinions. Tm often asked how long I will hold astock, and my answer is almost always “it depends on the stock.” You can hold a stock as long as it’s acting right. You make adjustments based on the market conditions, how much profit eush- ion you have on the stock, and the research you've done on the company. I owned Pic ‘N’ Save for over seven years, We made estimates of how many stores the company could open up. Buying right is only part of the equation. Knowing how to handle a winner once you've gotitis the key to making the big money when you're right.How To Find & Own Sell into rally, Do not buy - late stage, 7 sata tat bate cap ncoutivaee, 2 America’s Greatest Isa nor-bese and ery 6 weeks ° Opportunities = By Wiliam O'Neil Tey By William O'Neil : Weekly Chart 2 4 cs i c : : 3 » : L dnt +. 15 ‘ : t Nobuy sean Buy “ | 2etall weeks "up from bottom i t “Do not buy - straight up from bottom NS “Taaweck cup ‘—e ‘| into new highs after 38% correction po 10 fon pom so some elnatene seata chem ‘Stock tripies in only 10 weeks, Shows ‘enormous power plus big EPS, sales, and ROE. Must hold for more time, 10-week proper cup can be bought Prior 2 straight up from Bottom pate ware oly 5 A ema 2nd pupa “> Wests anol sun cp bases g NE smal 2nd plac Frat one was oo wide id se ala L 46 ‘Add on huge a volume Ticease iS istpullback 5 _ This is first week during correction that cleary a8 weeks to 10-week closed below 10-week ine and the important 4 , ~ fatty st fi moving average line ~- week. twas below average volume, so normal 4 and OK. Nex! week, while volume is above 39 NG 7 average, is not as key as {streal close below 28 7 4 of 5 weeks line. Also, correction was only down 25%, which 26 3 fit closing was normal. Then stock reversed, closing at 24 congo fh of les Sows peak - leading to weeks up in arow, a positive 22 if accumulation, a 7 adjusted down on chart ~ >|! 7 S-week cup due to five 3/2 splits. So, is ! price of first buy wasn't ‘ 1 . i |) sround $2.50 it was i substantially higher. a +400% +400% +200% +100% 460% +140% +200% +#250% +125% EPS % Chg nds | Sepes | Dects | Mares | dns | Sep85 | Deo 68 Maro | dun 05 baw TCBY Enterprises incorporated serts. Ifyou bought their product, _averageup333% in 1984, By late 1985, theyhad102 _didyoualsoconsider buying their * 3quartersofsales brand-new This Can’t Be Yogurt stock? Why not? All the vital facts averaged up 263% dessert stores in 25 states.In1986, Were there atthe beginning. *Returnon Equity 33% they operated 17 and franchised The chart price structure was *Pretaxprofitmangins 26% 225 yogurt dessert stores in 34 right, the volume data were right, *Nextyear’sEPSest up 10% states under the TCBY yogurt name. TCBY served flavors of yogurt containingall natural ingredi- ents. It was an instant and fast- growinghit. Ifyou liked ice cream, youhad to like their innovative frozen des- the general market was in an uptrend and the economy was strong due to Reagan’s across-the- board tax cuts. Here were the vital facts known, at the time of TCBY’s first buy point: ‘Last 3 quarters of earnings *P/E Ratio atits peak. Fromits firstbuy point, TCBY increased more than 1,700% in just 19months. Real skill at reading charts plus looking for great fundamentals can have huge payoffs. 17 grewto98How To Find & Own America’s © Greatest Opportunities: By William O'Neil : Sell: cimax top =" Follow-through 3/17108 \ BR SEsRas B ‘Add: off 10-week line WN i Volume declines 17 Buy: another 1/* for each week of 45 high tight 3.week flag NGF corrections 8 3 7 positve action |? climax top, ts only / 9 T weeks out of base ! Buy: a high NA tight fag fi f 5 48 42 Ahigh tight flags arare 39 pattern with usually only 13.4 or2eceurringinabul 3 market year. (On the chart you vill see 22.6 fastrunup of 100% or | 24 more in only 4 to 8 weeks 22 followed by 3 to 5 weeks of 1.8 sideways action holding «1.7 most ofthe huge gain. 4.5 13 42 ‘ ‘ 11 10 os os bet o7 pres eested Excessive splits gg for stock spits @® Tower volume Voune on price declines Heavy volume momen on breakouts SS 39,000,000 14,000,000, Volume sees steady climb up ome 2,000,000, Sep oF ‘Mar 02 EPS % Chg Date in 08 ‘Taser International created and marketed less lethal, conducted- energy weapons used mainly by law enforcement and corrections authorities. The devices were credited with reducing officer in- juries in confrontations with sus- pects. ‘The company showed rapid increases in quarterly earnings and sales from the beginning of its enormous run until after its peak. The pretax profit margin in 2003 was 30% and returnon equity was 26.6%. Sales for the year advanced 148% as its products gained popularity. The P/E ratio expanded from 28 to 213 at the top. Don’t let anyone steer you away from buying a stock just because they say the P/E is too high or the stock is overvalued. Some- times you have to pay a premium forthe best. ‘This unusual situation built several high tight flag patterns over the course of its run. Some of these steep run-ups may have looked likea climax top and could have fooled you into selling. But usually after a climax top the stock will drop quickly and very hard. Taser held tight after these earlier run ups. Ifyou were able to recognize the pattern as a high tight flag rather than aclimax, you would have been able to take advantage of an enormous opportunity. Qualcomm had similar action in 1999, so knowing your history also would have helped. Taser increased over 1,300% in only 30 weeks from the first buy point on the chart at $4.50 (split- adjusted) to its eventual peak over $64, You had to be fast on your feet and a decision maker to catch thisone.How To Find & Own America’s Greatest Opportunities By Wiliam O'Neil Qualeomm® "is a San Diego tele- ‘communications company. Much of the digital wireless phone system uses Qualcomm’s own code division multiple access technology, called CDMA. Note that the stock formed three chart bases: ‘The firsttwo were faulty improp- er bases that failed), but the third wasaclassiccup with handle. The first base had three bot- toms. Sound bases that work almost always have only one or two bottom areas, and a double bottom should see the second bottom undercutthe first. The second bad base had the same defect with even more time spent in the low part of the base, which is a weak sign. But 24 weeks later, after a general market shakeout, a cup with handle forms. The stock then advanced from 7 to 200 in only 52 weeks. It ballooned more than 2,700%! ‘Ast base is bad 2nd base is bad volatile tech stock and the S&P 500had asharp decline over 15%. Apple five years later formed a shorter, 19-week classic cup with handle that corrected only 23% since the S&P 500 had a much smaller decline. Market corrections form new bases and new leaders so you don’t want to miss market turnarounds. ‘America relentlessly creates new innovative, entre- preneurial superwinners every cycle. Once you spot them, you must always Qualcomm Weekly Chart a Sell - climax top $100 to $200 in 3 weeks Prices adjusted down based on 2 stock splits > Buy }--This winning pattern has been 13 | > tepested hundreds of imes by 2 [many other successful stocks and 44 wil be repeated many times in the future. Ifyou are a motivated 10 ! and willing to study charts you. 9 can learn this key sl si 4 1+2400% | +262%| +346%| 49% | -24% | 129% | -33% | 429% | 4375% | +229%| +219% | +47% _EPS% Cho jing? _|Sep97_[osce7 [mars |.iun08 |Sepos |Oecos [Maro [Junge | Sapg9 [Dace [1ar00 Date If you lived in San Diego, you use a checklist to make sure the _ annual EPS growth should have known about it The stock has strong earnings and Last quarterearnings+29% San Diego Union-Tribune pub- lished five stories on the company before the perfect cup with handle formed. If you had learned how to read chart patterns, you could have spotted the pattern re- gardless of where you lived. There are small cups usually seven weeks or more, midsize cupsand big cups. But theshape is the same and you can learn to rec ognize it. Qualcomm was a 24-week cup. Top to bottom mea- sured 42% because it was a more sales. That’s essential. Once bought, when do you sell? Let the stock tell you. Once you think you possibly have abig winner because it’s one of your best performers, you could hold until your stock either closes the week ‘on huge volume and materially below its 10-week moving average,or hasaclimax top. Key facts publicly known attime offirst buy point: Last 3 years EPS $0.30, $1.28, and $1.70, averaging79% # Last3 years annual sales growth +99% Last quartersales +54% Relative Price Strength 81 and Accumulation/Distribution A © %of sales used for R&D: 10.4% Cash flow was 2 times EPS and nodebt Next year annual estimates +50% Jeff Vinik, a sound hedge fund manager, bought 300,000 shares asanew buy ‘© Management owned 13%By William O'Neil How To Find & Own America’s Greatest Opportunities 8/17/00 Follow-through 5/30/00 TARO PHARMACEUTICAL (TARO) Weekly Chart Large cup with handle Follow-through AYN. Follow-through 1/9/01 80 Follow-through 7» 4/1001 A sap 500 © \ Ue 0 4 2 Sell: channel "4 s line break 4 20 2 y 20 24 B buy \ add 22 i. Yo Never closes 19 f below 10-week 47 line during run ye 8 fe. 4 ‘Ada: at moving 8 average 2 n Sharp pullback but 40 closes above ‘0-week ‘ moving average line 8 7 6 5 46 42 30 a4 30 28 20 : 24 Railroad tracks 22 on volume Ou +0% Big volume clue in third week of handle area AS +167% EPS% Chg ‘Sep 86 | Dect Maree |Junde Junot [Sep 01 Date ‘Taro Pharmaceutical wasan Israe- li company that manufactured and sold mainly dermatological pharmaceuticals in North Ameri- caand Israel. Taro spent 14% of sales on research and development and in the three years prior to 2000 produced an annual earnings growth rate ofapproximately 100%. Itwas one of the rare exceptions of a stock that advanced over 40 weeks while the S&P 500 was de- scending into a bear market. Ge- neric drugs were a way for con- sumers to save money duringa re- cession, plus Taro’s earnings ‘were growing. Lorillard, which sold Kent ciga- rettes in the 1957 bear market, was a similar early example that begana50-week advance because it had something that at the time gave it a needed edge. Its new product wasa filtered cigarette. It ‘was supposed to overcome cancer fears from smoking and it was, as aresult, sellingmore product. ‘Taro broke out of the large cup- with-handle base in October 2000 and never closed below its 10-week moving average price line until it finally topped. It provided several opportunities when investors could add to their hold- ings in the stock as it met and re- bounded off the 10-week moving average line, Outstanding stocks almost always give you additional bases or right times to buy if you missed your first opportunity, as long as you are patient and pay attention.Opportunities By Wiliam O'Neil America Online was an early innovative leader inonlineservices. In- corporated in 1985, the company had its IPO in 1992. The Internet. was the latest new industry dur- ingthe 1990s, and AOL was one of the few showing amazingly rapid How To Find & Own America’s Greatest 10 170 Sell - climax op 160 140 i ‘Add - Ascending 120 : ivi base forms after 120 3 pullbacks / 0 } [}- 100 / 90 AOL 2nd pullback yi 80 Weekly Chart ‘after new high ‘Support on volume 70 t In 3 weeks, AOL ton ‘ist pullback wo recovers ground sales growth and profits. Many gejjon climax _‘estin prio" 5 / . Btn week since pivot, AOL is at companies were losing money... move as stack hits Weeks. Poin ror 90095 sh hol untl 50 and many later went -bank~ }-- enna ine one r--7 WOeweek line on huge volume 4 Tupt. volume of its run AOL up 20% in 3 weeks, a In any new industry you al- a meane you must ols 8 8 ways want to buy the true lead- \ 7, weeks from pivot point at $30 ii ers, those with the best products, Aped— Buy, 14week cup with x sales and eamings. You don’t ete eee 2 need to buy a company that’s los- with follow-through day 3 ing money and : i x“ Shakes out on volume 16 below a prior ow, which is 7 a positive when it closes in upper ha‘f for the week 15 1 ‘Add on big volume a Buy n big volur B y fd It puck oa pi ses ® average ne 10-week line on the way tt up and closes at peak 10 ry Largest down volume ee mule] tani onan, singe beginning of H move up 27 weeks ago at top in April 1999 8 . ‘12-week cup Volume Price closes in 3 with handle |” Voiume off breakout Volume ~~ upper haif and 7 10-week line ‘ ppor off 10-week line 6 he : . Volume ry on volume aiy,_ | support ah di Climax top Volume : + Wane Wo 2 20020000 40,000,000 20.020,000 Knowing is always better than hoping. AOL zoomed from asplit- adjusted $12 to $175 in just 15 months. Your job is not just to be right, but also make significant money when you are right. It's critical to have and follow proven rules at every stage of a stock’s move, so you don't have to go by how you feel or your personal opinions. Notice how we're buying only off of specific price and volume patterns and only stocks with big plus sponsorship. Note also, after initially buying as a stock emerges from specific patterns, you have rules to hold until certain defined things happen before you sell. This removes a lot of personal emotions from yourdecisions. Themore proven rules and pr ciples you know and follow, the more your overall results should improve. Anyone should be able to learn how to follow sound rules — if you are motivated and deter- =33% | +50% —[+120% | +500% |+200% [+250% |+350% | +175% | +160% 2S Horo anor | Soper [bese7 | wares | suns [Sopa [paces | waraa | sino | Sepa) Dato hopes to make it in the future. increases in sales and earnings, mined. Investing isn't always easy, butthe big opportunities are thereevery cycle. Here are the vital fundamentals available to everyone in January 1998: * Last 3 yearssales $394 million, $1.1billion, $1.7billion * Last quarter EPS +50% Last quartersales +49% *Beta0.76Alpha5.76 © Number of funds owning AOL upeachoflast3 quarters «Fidelity, Alger and Zweig all owned AOLHow To Find & Ow Greatest Opportuni By William O'Neil REEBOK Weekly Chart n America’s Follow-through day 1128186 \ Not a climax! Les than 18 weeks from breakout After 8 weeks, youve survived a major shakeout and have anice cushion : Up 20% in first week must hold for 8 full weeks 3.weeks fight closes x Buy 14-week cup with handle ‘S&P 500 y yaeg « Set cima top 2s en Ser spit * Ss, \ 8 “ 2 = z zB 2 Me f Try to hold through the17 first 20% correction in your big winners Stock roids tight eter 1 / moving uvs0% =p SX Buy frst putbackto 10 tO-week moving. g average line Shakeout o 10-week moving average line 7 New issue ~~: corrected 21% ~! 6 5 45 42 Buy the big volume 38 bounce off 10-week a4 moving average line Heavy volume 30 on breakout Voume 4.000.000 1,600,000, 800,000 400,000 70035 (200033 S| 200,000 EPS % cre Date suns | Sepa Before the 14-week cup-with-handle buy point, Fidelity Magellan and Twentieth Century growth funds were on record as taking a new position in Reebok. The sneaker maker's prior four quarters of earnings were up 450%, 543%, 475% and 295%, Sales were also up a similar percentage. The after-tax profit margin was 13.3% and return on equity was 161%. Up/down volume in the week before the buy point had jumped from Ll to L5. Kidder Peabody wasthe investment banker. From thebuy point shown, Ree- bok more than tripled in just 19 weeks. It was a new company incorporated in 1979 that designed and sold high-quality athletic shoes manufactured to its specifi- cations in South Korea. In 1982, Reebokintroduced the first athlet- ie shoe specifically designed for women. This coincided with the ‘emerging popularity of “aerobics” as a fitness exercise. Athletic shoes were also becoming used by adults for more than just exercise, as they became accepted apparel for casual, everyday use. Tennis, fitness and running shoes accounted for 47% of sales. The stock came public in 1985, and in 1986 Reebok completed a strategic ac- quisitionof the Rockport Co. ‘The P/E ratioexpanded from 15, to 24 during the rapid price run- up that resulted from Reebok’s huge sales and earnings-pershare growth rate. Due toAmerica’s unlimited freedom, young new companies with unique, superior new products and services continue to pop onto our marketscene. Save all of these weekly IBD models and you'll better come to know the vital facts you must look for in future winners.How To Find & Own the free enterprise system's very bestcompanies. Each of the last 27 new market cycleswasled by cither new inven- tions or innovative new business- es. From covered wagons to the steamboat, to railroads then cars lane, jet airliners and ee. From pen and ink to telegraph, light bulb, tele- phone, typewriter, camera, the radio, TV, credit cards, discount stores, semiconductors, the “pill,” lifesaving drugsand medical operations, mainframe computers to You are free to buy and prosper from each cycle’s new innovative ‘companies. Pay attention to where you, your kids and friends shop and what you buy. If these innovators have stock, check them out carefully. ‘Leam how to invest more wisely. Protect yourself withmoreknowl- edge and skill. You may surprise rself if you're determined to benefit from thiseountry’s never ending creation offuture new maret-leading companies. Key data publicly known at time i 170 ea Apple (AAPL) 150 America’s Greatest Ween Chor FE Opportunities ‘e ' 10 : Sail 3 weeks is not a fat base By William O'Neil which must be § weeks or more. ano Tesalwaysbettertofollowhistory- PGS the Internet, Siock hast deubied asin oo proven rules of when it's best © How apple's Pads : oF buy or sell You will make fewer AD le wasalays S, 0 mistakes than you will when SFP e Waray ‘Add after 4 you just go by personal opinions jjever fully capital- weeks tight 60 orhow you feel psychologicallyor ized on its prod- Add listening to tips. Also note how 176° OM. gS, Prog 0 when true big leaders correct, Cponged’ after oN 1 they tend to stop atthe top areaof g7ansee, al ’ ‘Add off 10-week moving 42 theprevioussoundbaseor getpro- Eitned to comes ineonvkn ce fessional support around their {he eGm. 10-weekmovingaverage line. pany ™ ‘The real key is the outstanding Bb 0 new leaders need unique new 28 products that are dramatically dif- ‘Aad off 10. 2 ferent and better than theircom- pseek mova 4 Sat and better than telrco average line on volume 2 ings should be up signifi- e cantly as gain ew A/S Acd off 1O-veek moving share of market average line on volume. Also, " and institution ‘Sth quarter of EPS over 200% a uyers. “Buy You NS % 2 1 10 ya Note 6 weeks tight closes: a 19-week classic means accumulation: ae cup with handle $ 8 7 Do not sell on this big volume close 8 Big earnings increases drive stocks below 10-week line. The first 2/1 split and they are more important than after big run up will correct and later az the PIE ratio or dividend yield. move higher, especially when prior 3 44 America has more innovative new quarters had huge EPS acceleration 40 ‘stocks than any other country 36 7 vou i 7 +40000,000 sf 10,000,000 40,000,000 20,000,000 +350% | +300% | +233% | +275% | +289% |+325% | +270% | +147% | +86% |[+38% | +46% EPS % Chg Sep05 [Dee 03 |Werbs Juno# [Sept [Dees [MWarO5 [wands [Sep 05 _|ss05 |MarO5 [sun 5 Date could in time become financially and unleashed a stream of new _ of firstApplebuy: independent if you really study technological advancements in * Stockisaturnaround:Last2 and work at how to find and own music, mobilephonesandtablets. quarters EPS 300%, +433% Quarterly sales accelerate from -1%, to +8%, +19%, +36% eUl wn volume 14, ahavehigh *R&D 7.6% ofsales *Nodebt Management owns 4% ofstock © NextyearEPS estimate +130% *Sponsorship, 3 top Fidelity fands took new positions of over 2million shares each © Last quarter 14% above EPS estimates *P/Eratio 72How To Find & Own America’ s Greatest Opportunities By William O'Neil Sell based on 2 cifferent rules: 2 weeks down to 10-week line then 2 weeks back to naw high after long run-up and railroad tracks retracing same area on heavy volume A 3rd week of railroad tracks on big volume plus excessive split ‘S&P 500 70 NOKIA CORPORATION (NOK) v Weekly Chart © Follow-throush e 10/28/09 Aa @ \ Foleo ont gly /-~~ Stock becomes 8 623/98 a wide and loose , 4 Fone sough AOA. around market top plus 2 examples of 30 railroad tracks = In 1998, we used 5 distribution days 4 weeks closing e on S&P 500 as a market sell point tight in handle area That occurred on this week as stock 0 closed at its peak. The 6th and 7th 18 distribution days occurred the next ‘H-week cup ‘6 week, which is where we are selling with handle 2 "Aaa Buy back using Livermore's shakeout 8 +3 rule on a $30 stock. When stock a Buy undercuts a prior low of several weeks 7 ago and then recovers 3 points above to the prior low, that’s a new buy point : Buy 8 \ 7 “py / sweek —to-week flat base ~ double bottom 7 Hag aN Fy with handle 43 \ T weeks up a4 inarow 40 22.veek cup 38 ith hand wanten’ Excessive split $2 All3 weeks, while o 3 evn coed in upper ‘On way up, 7 weeks 28 sigan "(G) Siasbandvime (3) @ Youre 120,000,000 70,900,000 49,000,000 20,000,000 +25% —|+50% | +48% EPS%Chg Decs9[Maroo [| Juno0 | Sep 00 Oto Nokiawasthe world leader inmo- bile phones from 1998 to 2012. Earnings growth accelerated from 30% in December 1997 to 90% in March’99, Sales growth accelerated from 9% in September 1997 to 74% in December ’98. An- nual return on equity grew from. 31% in 1997 to 40% in”99. In July 1994, Nokia had its IPO. at $20.25 and reached a peak of $103 by March 1998. That's the date that shows the 22-week cup with handle and your initial buy point. The buy point of $6.75 was adjusted down to reflect two stock splits of 2-for-Land one split of 4-for-1. Nokia’s P/E ratio was 26 at the start and ultimately expanded toa. peak of 90. The EPS Rank was95, and the up/down volume was 1.6. Jeff Vinick, a former top Fidelity money manager, had just bought 173,000 shares for his newly formed company. More than 200 mutual funds owned 14.4% of Nokia’s stock. Nokia advanced nearly 10times in just24 months. Let’s be realistic: You won't get anywhere in any field unless you have a strong desire to learn what you need to know to succeed in that field. That applies to stocks. Ifyou have the desire to improve, here’s what I think you should considerdoing: 1)Read asound book onthe market. A new one just out is “How to Make Money in Stocks: Getting Started,” by Matthew Galgani. 2) Get access to a weekly chart service and learn to recognize base patterns and buy points. 3) Follow buy and sell rules to take most of your profits when up 15%, 20% or 25%, and sell and cut all your losses when down 7% or 8% (don’t jump the gun and sell when only down 2% or 3%). 4) Buy stocks with the best fundamentals and an IBD Composite Rating of 95 to 99 when the general market is in an uptrend. (The Big Picture column in IBD every day will tell you if the market isin aconfirmed uptrend orin acorrec- tion.) 5) Keep studying, learning and gettingbetter prepared.How To Find & Own America’s Greatest Opportunities By William O'Neil McDonald’s intheearly 1950s created the new “self-service fast- food revolution” with 15-cent hamburgers and 8-cent french fries ready almost instantly for takeout. I used to go to the third Me- Donald’s that opened in America. ‘It was in Reseda, Calif. I had just left the Air Force and was a green- horn too young to recognize the immense potential of this new en- trepreneurial retailer that was right before my own eyes, but at least I could afford the product back then. When the 1966 bear finally ended, MCD was one of the first stocks to break out of a 26-week cup-with-handle pattem that formed in the Add-3 weeks tight closes poor market. (You'll see this happen over Buy Large 49-week cup-withrhandle base forms during bear market that began in Now. 1988 Volume Tweeks up in a row high doesn’t mean it can’t build, after a sharp general market correction, asound new pattern creating another opportunity. The good chartist stays on the job every week, increases his or her skill and will therefore spot the new opportunity when it finally reappears. 2) Now, here’s a super lesson. After McDonald’s stock” was sold in May — 1972, due to our channel line rule, it under- performed for years. But on January 19, 1982, a Note: a base on top of a base while S&P 500 makes: a new low in November for akey divergence 18 weeks | up in a row "Add off 10-week moving average line McDonalds (MCD) Weekly Chart ©) Breakout volume Sel - channel ine break "0 Hi ctolbbat i 6 taal a Nain 8 4 patterns with skill (which youcan do) and always combine charts with outstanding fundamentals, sales, earnings,and return on equity, ete, the market will tell you when it’s time to take action. If you just go by your personal opin- ion about all the news events, you'll probably make more mistakes. Our channel line rule is to sell a stock after it emerges from a sound base, advances significant. " 0 8 week line ly and shows three price peaks spread over 20 weeks. The weeks must be plotted with ample space between each peak and the straight line you plotted gets pene- trated on the upside. Acting on this is completely contrary to human psychology. Typically, you'll be happy as alark and think the stock is going a lot higher. ‘That's why the rule works. and over in each new bull market.) It soared 500% in only 34 months in the 1967-68 bull market. Later, MCD formed a new, but longer, cup-with-handle pattern in the 1970 bear. Itadvanced from a split-adjusted $15 to more than $60 in just 18 months, once the bear turned up into a new bull market. You cansee this on the an- notated chart with thisstory. The example has a few lessons: 1) Just because a unique new company moves up inprice and seems new base formed and MCD increased an incredible 35 times until a top in 1999. Surely you must either have known about MCD during that time or used their product. Did you ever think about buying the stock? Four years after the 1999 top, MCD roared up again and tripled, creating a 100-fold move from 1981! ‘There isn't room on this page to show a 35-fold move, but in a future week, we'll show you that period ona monthlychart. Ifyou learn to read classic chart Here are MCD key facts known, to investors in November 1970: 16 atrs. steady earnings growth * Annual EPS growth rate 27% © Last 3 qtrs. EPS +31%,+28%, +33% © Annual Salesgrowth rate 31% © Top growth funds then owned MCD: Magellan, Security Equi- ty, Invest, Colonial Equity 49-weekcup-with-handle base © Breakout daily volume up 176% © #Lin field, lowest prices © Nearly everyone buys hamburgers Bull market began 2 qtrs. agoHow To Find & Own America’s Greatest Opportunities By William O'Neil Major sell Follow-through Follow-through 8/13/99 shows 5 days in a row the stock makes a new high on the lowest volume in prior 21 days signal: daily chart cilbalanoe of position as negative volume picks up 120 0 New highs on 80 lower volume *0 J After 8 full weeks, you've S&P 500, f. Survived the frst shakeout 0 ORACLE (ORCL) Siihsesegennon 2nd pullback to 10-week line ‘weeks. Volume ‘was only up 10% and then 11% Remember, there are small, mid-size, and large cups with handle, but the overall shape and look is the same, so its worth eaming to always recognize it when you see itn the future Sell when goes through Priceline.com (PCLN) Weekly Chart : if 130 420 110 400 90 you if you are willing to prepare yourself and determined to stick with the effort. It could even be fun and challenging. Be sure to * keep and study all of these special marked-up examples for your future models. Here's a final big added incen- tive foryou. Afterselling Priceline at $120 by following the channel line penetration rule while the stock was still advancing, Price- line later dropped to $47 during the major general market correc- © tion of 2008. It then recovered and the S&P 500 hit bottom and proceeded to give a follow- through day buy signal.Next, are- bom Priceline showed two new, clear buy patterns, one at $90 and the second a perfect classic large cup with handle pattern at ironi- cally $120, only a year and half after the prior channel line sell at x Value 13,000,000, 8,000 000 5,000 000 + 3,000,000 \ 1,800,000 10% | +34% | +53% | +107% | +126% | +102% | +119% | 468% | +77% | +40% —~EFS%Chy Merce Jun 08 | Sep06 | Decoe | Maro7 | Juno? | Sepo7 | Decor | ards | Jun08_—_oate chart service you checked every _ the very best stocks that include $120. Priceline then soared from week so you would not miss this great pattern that's been repeated ‘over 100 timesin the past? Did you notice this company also had a 98% average annual earnings-per-share growth rate? ‘As of late 2006, Priceline had booked 2.8 million airline tickets, 187 million hotel room nights, and 7.5 million carrental days. This first 15-week classic cup with handle chart base was also created during athree-month cor rection in the S&P 500, which is how most classic bases are formed. Were you tracking charts every week during the market correction so you were on the job when the S&P 500 had its follow- through day the end of that June? the vital fundamentals and chart patterns, plus rules for the dissec- tion of key general market index- es and finally rules that tell you to stay in and not be shaken out until crucial proven sell rules tell you it'stimetosell. Don’t ever let yourself be discouraged and give up. These rules can be learned and if you are serious and work to better prepare yourself you can learn the neces- sary steps. Remember every new cycleis led bynew innovative companies. You've seen many in the past but probably didn’ tknow how to fully capitalize on them. You will see many more in the future so don’t lose your confidence. It’sall up to. $120 to $774 for a new 545% advance. ‘fyou're curious, you can caleu- late what a 545% advance on top ‘ofa 250% increase adds up to. Vital facts known at the $35 buy: © Stock was up 5% on 9/22/2006 on volume 960% aboveaverage * Annual earnings growth +98% ‘* Returnon equity 20% ‘* Management owns 36% Last quarter EPS +34% © After tax margin7.5% 3 qtrs. rising fund ownership eJeff Vinik owned 11 million shares. Goldman Sachs as investment banker © Relative Price Strength90How To Find & Own America's Greatest Opportunities By Wiliam O'Neil Follow-through 10/19/92 ‘ 7” S&P 500 8 _N Follow-through 12/20/91 Buy ~ Follow-through 7 ANtTI91 Sell: stock has split 3 times, breaks out of late-stage base that comes straight off the bottom into new highs 19 Follow-through 10/18/80 RRRBE FBS Cisco. Systems was’ one of the greatest-performing stocks of the in one week ” 1990s, It was the leading supplier : of multinetworking products, in- @ cluding routers, bridges, termi- 8 - 5 2 ‘Add as it comes back over moving peas ‘Add as it gets close to moving 4 " average line and volume increases average line and bounces back with)... ! 10 volume picking up CISCO SYSTEMS (CSCO) 8 ari i Weekly Chart 7 Hill <. Buy at $6.60 (Livermore rule on $30 stock as it Add after t-week undercuts low and recovers 3 points it becomes a buy i ° handle shakeout Stock was $25.50 at the time adjusting for 2 spits) 5 Cisco continued to build multiple #8 ‘Another buy point \ Ae 9 weeks up in a row with big volume bases before eventually topping in ~ 42 i - forecasts a giant potential future for Cisco March 2000. From the initial buy 38 stock and its 100%+ earnings report point, it went up over 75,000%! 3a. Buy using Jesse Livermare’s ae Initial Public Offering February 16, 1990 Big Volume Shakeout + 3 rule. After stock Undercuts low and then comes back above it by 3 points you can buy. Stock was $26 at the time (prices are adjusted for 3 solits) Straight up from 9g bottom to new highs 24 injustone week 9 Less volume 18 on 3weeks up 47 2 15 Gan $200 Mars G)- Huge volume 167% {4 suns | Sepet_| Dec 91 Mar 92 EPS cng sepe2_| Dec sz Jn93 Owe nal servers and network manage- mentproducts. The huge demand for Cisco’s products made for astrong fundamental story. At the time of its first breakout, Cisco already had nine quarters of triple-digit earnings growth and even more quarters of sales growth. The return on equity was 36% and the pretax margins were 34%. Cisco's industry group at the time, Computer — Peripheral Equipment, was ranked No. 28 out of 197 industry groups. The stock’s Relative Price Strength Rating was97.All the important components were there: ‘earnings, sales, a new product, a new issue, relative price performance, and a leading industry group. When the markethada foi- low-through day on Oct. 18, 1990, Cisco broke out on that very day, using Livermore's Shakeout +3 rule, It had a 131% increase above its average daily volume. Cisco went on to make a huge move as the Internet grew in the mid- to late 1990s. Itkept up with rapid changes in technology with frequent software upgrades. This gave Cisco an edge in a quickly evolving environment. Atits peak in March 2000, Cisco was the most valuable company in the world and had seen a 75,000% move in 10 years. While it may have been difficult to catch that entire move, there were 12 differ- ent opportunities to buy the stock during the first 27-month run-up, plus another 12 buy opportunities 22 months later when Cisco formed anew, large cup with handle that broke out in March 1995, Just catching a small portion of the move would have been suffi- cient to change your whole life.By William O'Neil ‘Wal-Marthad its first public offering of stock on Oct. 1, 1970, at $16.50 and was traded over the counter. It then only had about 800 shareholders. If you were aware of the company, and be- Jieved in it and bought just 100 * Ok to sell some on stalling action (hold tax selling is due Ok to buy after 2 shakeouts and anew base most). I's up 20% from last base and 52-week How To Find & Own America's Greatest Opportunities There are now approximately 9,000 Wal-Mart/Sam’s stores in Mcountries. Itis the largest retailer in the world, having created a million jobs. ‘And Wal-Mart's lower prices materially enabled the broad-based masses to, im- Do not buy - straight up from bottom to new high ” Buy”! Wal-Mart (WMT) Weekly Chart S26 itas shakeout below point x 6 weeks ago Not a flat base, double bottom, or cup with handle. It's straight up ftom bottom to new high and needs sharp pullback to adjust for getting out of position and not stopping within 10-15% of new high Classic cup- wih-andle ‘weekly chart pattern Volume 100% above weekly average th Volume is up big but price stalls on high with no progress (62-week seling) RRP RREReRE BAS ~ But it’s all up to you toget serious, make up your mind and really work at it until you know what you're doing. History keeps re- eating itself with creative newre- tailers or retail products. Be sure “you save these great examples every week to know what you wanttolookforin the future. Key facts publicly known on June6, 1980: Annual Earnings Growth Rate 32 30 28 28 an 2h Low volume breakout - Don't buy LA +50% #25% — +29% id #31% +26% +40% +39% +33% 453% — +33% +4d% +30% — +54% EPS Oe Mare Jun) Sepa? Decso Maré Juni Sepét_Dec8t_ Marea und Sepa2 Deed? a8 Date shares for a cost of $1,650 then, by 1992 it had nine stock splits and you would have had 51,000 shares ‘worth about $60 per share, or $3 million. But that's not all. From 1993 to 2000, Wal-Mart had two more splits, and from early 1997 to the end of 1999 the price of the stock increased in value another four times, so your original $1,650 investment wouldbe worth $12 million. That’sastonishing! From 1970 to 1980, the discount retailer’s sales doubled every two years, and stores increased from 23 to 51 to 78 to 135 to 195 to 276. prove their standard of living. So over that 30-year period, did wor any ofyour friends or fami- ly members ever shop at a Wal- Mart or know about it? Did you or your friends or neighbors recognize this enormous opportunity and buy Wal-Mart sock? For years, Wal-Mart grew earnings 35% per year on average. My purposes to get you to think about and recognize the next round of amazing new innovative companies that show up in each new market cycle. This has been going on for 100 years, and it could just change your whole life. 1971-75 =34%, 1976-80 = 36% © Wal-Mart for last 10 years con- sistently grew average annual earnings at arate of 35% © Returnon equity 26% *Next-year earnings estimate 34% ©P/Eratiol2 © 195 discount stores in 10 central and southern states with plans to increasestores 17% next year Join William J.O'Neil onAug.i1in Los Angeles as he provides in- depth analysis andthe story behind some of the greatest model stocks. Learn more at Investors.com or call 1-800-664-2013.How To Find & Own America’s Greatest Opportunities By William O'Neil yo \ Omnivision Technologies special- izes in digital imaging devices. In 2003, there was agrowingmarket forits chips for use in digital cam- eras, mobile phones and personal 3/17/03, Follow-through 2127103 Foltow-through Sell: stock goes through upper channel line Add off 2 10-week line Add as it gets close to moving average line and bounces back with +5 volume picking up from prior week 14 Pris aroeeice 3 Early buy at $15 using Livermore's 12 tule to buy if stock undercuts prior 11 low and recovers by 10% 10 9 8 48 OMNIVISON TECHNOLOGIES (OVTI) 42 Weekly Chart 38 : 34 30 Volume increased 63% 38 on close below 10-week 34 line and diminishes on 5 attempt to rally back 20 institutional investors drove volume up with Volume their increased involvement inthe stock ar. #,000,000 #,000,000 ,000,000 Ky f 1,600,000 ploy Na |-90% _|-82% |N/A +250' EPS% Chg Marot [Junot _[Sep01 [Dec 04 SHO Deed Dees [Mars Date computers that had digital imag- for four quarters, from 23% to ‘The base shown here was tighter, ingas an added feature. In the six months prior to the breakout, Om- nivision announced contracts to provide chips for usein Sony Eric- sson's clip-on camera accessories and Hewlett-Packard pocket PCs. ‘At the breakout, earnings growth was in the triple digits for the last four quarters, accelerating from 101% to 999%. Triple- digit earnings growth continued all the way to the top, which goes to show you the importance of usingachartforselling— the earnings will often look great at the top. Quarterly sales accelerated 206%. After-tax margins for Om- nivision Technologies were at their highest ever at 15% for the quarter before the breakout. Insti- tutions were also taking notice of the stock, with six quarters of growth in the number of funds owning the stock. This is also shown on the chart with the huge increase in average weekly volume, from under | million to almost 8 million shares trading per week. Omnivision had _ previously formed bases that were wide and loose, with corrections over 50%. only correcting 32%. There was also an improvement in the market condition as the market was re- covering from the tech bubble of 2000 and a 79% correction in the Nasdaq Composite. You need to pay attention, even when conditions are horrible. By recognizing the stocks that are forming sound base patterns with strong fundamentals, you'llbe able to act quick- lywhen the timings right. ‘Omnivision was one of the top stocks to appear on the IBD 100 (now the IBD 50) when that feature debuted.How To Find & Own America’s Greatest Opportunities By William O’Neil STORAGE TECHNOLOGY (STK) Y Weekly Chart Sell climax top: slack goes through upper channel line « Foltow inrough 488 7 out oF 8 day3 UP Sep go9 INN nA pM 50 4 \ 3 maak Nin 2 enair7 f “ Py saie\ ‘through 2 Storage Technology Corp. was Sore z the leading manufacturer of data- 2 storage devices for large-scale computers. 9 The company started in 1969 ad when Jesse Aweida,a Palestinian 8 refugee and former IBM execu- a tive, decided to strike out on his 2 own, along with three other - " former IBMemployees. Addo 10 His goal was to create asuperi- Buy Peak Kee 8 or data-storage product for IBM ‘haat a 1Daweek line 7 {o-week line contains 6 most of the move up iN : ‘Short cup with handle 46 within a larger 2-year cup a2 with handle + 38 36 Lower volume on break 30 of 10-week line, high 28 volume on rebound ae 105/100 108/100 x \ an vaume Big volume clue ig NX \ ~ fhe 300,000 460,000 j 7 0,000 40,000 | | sno +17% |+33% |+50% |+22% |+24% |+25% | +29% | +50% |+50% |+e5% | +73% EPs%cng ec75 |wer76 |iun76 |Sep76 |Dec78 | wer77 [sun7r |Sep77 _|Dec77 [Mer 78 _|Jun78 |Sep78 [Docs Date mainframes at a cheaper price ingin1976and22% in 1977. new innovators to replace the old than IBM's. The stock went public in 1971 and was listed on the New York Stock Exchange in 1975. Bythe end of June 1976, thecompany had six quarters of earnings growth above 20%. Earnings accelerated from there, reaching 78% growth in June 1977. Sales growth also accelerated during that time, going from 24% quarterly growth in June 1976 to 72%in June 1977. Return on equity was 19% for the fiscal year end- Nothing lasts forever. The stock peaked in 1981 and ran into finan- cial trouble after over-extending itself Thecompany filed forChap- ter 1 bankruptcy in 1984 and al- though itcame out of it successful- Jyundernew leadership, the stock never reached the same heights it sawinl981. It is critical to realize when it's time to part with a stock, no matter how much money you've made on it. The American finan- cial system is constantly creating maintainers. Byholdinga stock just for itsrun and then moving on, you never run the risk of blindly keeping a stock through long periods of un- derperformance. Selling on the way up, as in this example, is often helpful in get- tingoutofa stock. You may not get out at the very top, but once the move downward starts the stock can often pick up speed very quickly, destroying your hard-earned profits.How To Find & Own America’s sai-ccensestom ss Greatest Opportunities By William O'Neil EMC was the No. 1 firm manufac- turingand selling computer memory to major computer companies to $35 with 2 weeks down to 10-wesk line and x. 2 weeks straight back to new highs (not a base) 7) Sell point was 23 weeks from last buy ReBRS eB suchas IBM and Unisys. [call this Buy ® a cousin stock since it supplied a ‘12-week cup i with handle: 7 key growing industry during the 1990s technology and Internet boom. Everybody needed more memory as the demand for data continually inereased. ‘Add when stock 14 comes back above 1O-week line’ Do not sell when goes below 10-week line, wait to see how stock closes for the week. Do not sell next week which closes week on low volume. Do not sell 7 / con bottom week which closes at peak with volume up. That was support 6 Avoid shakeout that pulls back to 7 pivot and 10-week line on low volume 4. (general market was correcting at the time). Add when stack comes back. above 10-week line double botiom chart 2 base (bottom 3 weeks close tight) 34 An barly buy point would be $6 when stock breaks out of 39 ddowntrend line I's key to use fy charts to spat exact buy paints 4 to gain an advantage at the start A i 19 i 7 EMC (EMC) Weekly Chart i" 3 12 Bg 4 Huge EPS tow volume ee aie Al prices adjusted 10 G)_forthe2 stoxk soits Velume +100% +150% +225% +338% EPS % Chg. MarGiJunGiSop01 Des@iMarG2Jun02SepG2Cee02MarO3Jun63_Sep03 _Doo03_ Date Earnings accelerated over four spotmanysoundbaseswhenthey _Vital facts known publiclyat the quarters with the current quarter complete their formation. As soon _firstbuy point: up ahuge 300% and sales up 38%, just before the buy point. EMC also spent 7.5% of sales on R&D. ‘The number of mutual fund own- ersincreased thelast two quarters and Relative Strength was 94 at the buy point. It was a new issue six years earlier. EMC also created a base on top of abase, which was made by the priorbase breakingoutduring the startofamarket correction. Looking at many stock charts everyweek is how you will learnto as you recognize these new bases, you should check out all the vital fundamentals: strong EPS, growing sales, healthy profit margins, heavy sponsorship, etc. Ask yourself Whatdoesthecompany do? Is. there a unique new product that is, accelerating sales? Read an IBD company story on Investors.com, or run a Stock Checkup. You're lookingforthe top 1% or 2% ofeom- panies, so you want to make sure therearen’tanydefects. Last 4 quarters earnings grew 467%, +75%, +50%,+300% Recent sales +38% Pretax margins +9% * More fund owners in last 2 quarters * Newissue6yearsago No. 1 firm in computer memory forbigcomputerleaders * R&D % of sales 7.5% Classic double-bottom base breaks out, volume up 258% on 9/14/1992 Relative Price Strength94How To Find & Own America’s Greatest Opportunities By William O'Neil Follow-through 10/14/98 | 9/8/98 BIOGEN INC Weekly Chart Buy: big volume and big earnings report just out. P/E was 33 and expanded to the high eighties DS ‘Support week with heavy Follow-through Follow-through Foliow-through 10/28/99 2123/98 \ S8P 500, VON ‘ 4150 140 Follow-through ~- Sell: closes 130 a below 10-week 20 line on volume 110 5 | 100 % 8 t 7% 2 2 ry This is a late-stage, wide 49 11R5Ok cup and loose base, Weeks — 42 with handle 1,2,4,5,6,8,12, 14-38 Support week closes in ~"SnT7 were negalive, | 94 price and volume weeks. upper half of trading One week after breakout 3 range on huge volume °~-was huge volume and no "33 sq Price progress, The next Buy at $28 using Livermore's Wegk mado the overall 34 correction from 101 to 81 for a 20% drop which 49 happens in late-stage stock undercuts low of 25 and recovers by 3 points or volume and no further price “can buy at $27 when Biogen ~~ Iogse bases. Nusa progress down and closes | goes above prior week’s high 6 = inupper part ofweek’s and volume incteases as H Hy 21-week cup price area. Key: If you were | Stock goes above 10-week B - with handle shaken out of stock, you: moving average line S 2 must get it bought back i i 1" ‘even if you have to pay 2 10 points more More accumulation Sell: closes below 9 than distribution 40-week moving weeks in base @) average line on volume Heavy volume on Voume breakout week : 0,000,000 ae H 46,000,000 2.000000 4.000000 2000000 4317% |-7% +250% (+64% |+62% (+79% 420% [461% | +62% | +56% +63% EPS %eChg dune [Separ |Oecs7 [Maras |Jun98 |Sep98 |Decda |Maraa | JunS9 |Sep99 |Decoa | Maro Date Biogen (now Biogen Idec) is one for currentand future leaders. base patterns look like, including of the oldest biotechnology com-Biggen’s quarterly sales wereup {he cup with handle, the double- panies. all th the bottom base, flat base, high tight 30% to 40% all the way up tothe ¢> 720 ingb: It develops therapeutics using lagand ascending base. genetic engineering. One of its most successful drug therapies, Avonex, is used to treat relapsing formsofmultiplesclerosis. Every newbull-market cycletyp- ically offers one or two new leaders in the health care and drug industries, so keep your eyes open top. After-tax profit margins ranged from 24% to 30%. Return onequity was from 17%to 27%. Management owned 5% of the stock, and Biogen had a new CEO inFebruary 1997. To acquire some skill at chart reading, you have to first learn to recognize what sound and correct. You can definitely do this if you are motivated and get samples of each base to study. Once you can do this, it will be easier to spot faulty bases that are of the third- or fourth-stage vari- ety, are too wide and loose, have too much negative volume, or are bases for too shorta time,How To Find & Own America’s Greatest Opportunities By William O'Neil Hansen Natural made energy drinks and fruit juices sold under the Hansen’s and Monster brands. Hansen formed a large cup-with-handle base from the end of June to early November 2004 after climbing a hefty 350% in the prior9 months. On Nov. 11, 2004, Hansen broke outof its new large cup with handle on a 189% increase from its average daily trading volume. It then proceeded to advance mare than ‘Add huge volume equip and prepare yourself to spot and properly act on each market's new leaders with greater confidence, knowl- edge and skill. You can leam to doit. Itisn’teasy, butthe op- 3.weeks tight closes Buy / tSweek 1.200% in just 79 double bottom weeks, Not so bad for X selling energy est drinks. / Rad rebounds ‘The big question is ... did you ever buy energy drinks off 10-week line ‘Add rebounds off 10-week ine HANSEN'S (MNST) Weekly Chart All prices adjusted Breakout for the 2 stock splits nen volume Sell- / climax. top —e. 25 4 eis Addrebounds 9 off 10sweek line Closes in upper-half for‘? week and diown less 17 than prior weeks ig, deci (support action) 14 8 weeks in a 8 row up (7 with 2 peak closes) " 10 ° 2 dovln red weeks were support sg buying. 1st week closes at 48% of spread, 2nd week closes in 7 upper half of week 63% of price from low to high 6 10-week moving average line. Now, note when it built a later base from July to October 2005: It closed clearly below the 10-week line, but was either in low volume or closing in the mid or upper price range for the week, whichis positive action. This allowed you to stay with your increased position, which showed huge quarterly earnings and sales increases Excessive split" 17 ® 16 14 43 Low volume \ \ Velume 16,000,000 8,000,000 4,000,000 2,000,000 4140% EPS% Chg Mar05 maros |" Juncé | Sep 06 bate at a gym, supermarket or conve- nience store? Or, were you aware of Hansen’s product? Did you checkout thestock?Do you take a chart service that you use every week to help you spot classic patterns like this that are repeated overand over againevery year? America leads the world with a relentless stream of fresh entre- preneurial innovators and inven- tors that continually create unique new products and companies every market cycle. Maybe you should get really serious, portunities are there. It’sall up to you. Every Wednesday, I'll show you thebestofthebest leadershistori- cally and the common factors they all showed at the start of their move up. Now you will bet= terknowwhatto look for in the future, plus how to apply rules to help you handle these situations once you're in them. From the initial Hansen buy point in November 2004, notice how many times it met support when it pulled back around its until our climax top rule told you itwas ime to sell your wholeposition. Here are the key known facts at theinitial buy point: Last 4 quartersearnings +20%, +40%, +130%, +129% eLast 4 quarters sales +23%, 432%, +42%, +62% © 2003 Return on Equity 18.7% © Latest quarter after-tax margins 1% © Number of funds owning wasup last 4 quarters Monster product gains market share vs. industry. soy How To Find & Own America’s Greatest Opportunities By William O'Neil Followethrough A ena? Followthrough Son nvowsn BaP 500 { 13179 Follow-through NS \ ie 2 3110/78 \ 8 \ Sell: 3-week ” Lat climax top wth 0 10 days up ina 2B FLIGHTSAFETY row gaining 32% = Weekly Chart Sell stock By 5 2 goes through “ ‘Add: volume off Channel ine 19 10-week moving Add: bounce off ---17 average line 10-week moving ae Soka average line js goes through 3 channel ine > 2 " 3 weoks tight 2-week cup ‘0 3weeks tight / with handle ° By ‘a.week cup * with handle ‘Note: when 28-week cup with T hancle dropped on let side of base, it undercut the low of the ‘ = earlier small cup which is typical: ie ane 0 fn good for he now pototal 5 i 23-week double kes) base that is going to be built 4s bottom with handle. average line after FlightSafety had just trigled az in price from $8.50 to $20 ae a 30 ae 26 Big volume on 24 breakout Volume on bounces olume dyeup I" of iomeekcne ow in handle A an 4 Vaure Volume increases ‘on breakout yy HK y 7 H MJ +18% — [418% |+36% |[+36% [431% [415% [427% [420% [412% [460% |+21% |+28% EPS % Chg Deo 76 Mar77 | Jun 77 | Sep 77 Dec77 |Mar78 |Jun78 | Sep78 |Dec78 |Mar7@ | vun79 |Sep78@ | Dec 70 Date FlightSafety operatestrainingcen- Pan American. This was in the jary that manufactured simula- ters around the country using early 1940s, when corporate avia- _ tors. Thesimulatorsmodeled spe- state-of-the-art flight simulators _ tion was just starting. He recog- cific makes of planes and led to and a team of pilot instructors so__nized that while the pilots in cor- _plightSafety being named the fac- student pilotscan spend hours of porate aviation were well- 4 ini je ae ours . : tory-authorized training provider trainingonthe ground replicating trained, theyoften didn'thave op- for» numberofairplanemaneface all the controls and environment _ portunities for follow-up instruc» TANNOY G0 mC ‘Gulf theywould havein actual flight. _ tion, whichwasbecomingincreas- W7eFS, Including Cessna, Gull- ‘The founder of the company, ingly important as aviation tech- Steam, and Learjet, ALL. Ueltschi, was originally in. nology quicklyevolved. ‘The company was incorporated spiredwith theideaforhiscompa- _The controlled environment on in 1951and went public in1968. By nywhen he wasteachingaerobat- the ground provided a safe learn- 1980 FlightSafety served more ic maneuvers and ended up out- ing environment. It also saved than 1,600 clients. At the time of side the airplane. Later in life, he _ time and money over actual flight _ the breakout, pretax profit mar- was the personal pilot for Juan time. gins were at 39% and return on eq- Trippe, the CEO and founder of —FlightSafetyalsoownedasubsid- _uity was 25%.How To Find & Own America’s Greatest Opportunities By William O'Neil Google, headquartered in Moun- tain View, Calif, was incorporated in 1998, Goldman Sachs, one of the top investment bankers of technology companies, brought Google public with an IPO on Aug. 19, 2004, at $85 ashare. Itprompt- ly rose to $113.48 in three days, up 33% on big volume. That showed + Follow-through Followthrough- ~~! day Do not buy - Faulty base uy at $200 with voume [up 78% and next day gapsup on velume increase of 207% above | ‘They are simply unsure and areaf- fected by the negative news around market low points. After the 33% quick jump, Google had a pullback phase. Itwas down. two weeks in less volume cach week and then crept up slowly a third week in even less volume (a good sign for pullbacks). This Followsthrough day Sell, closes below 10-waek “fine on first week cnn with 64% increase over average ; weekly volume : Wedging up“; along laws average daily volume | GOOGLE (GOOG) Weekly Chart 4 weeks tight a loses shows ~Zbiggest volume buying at bottom weeks Inside base of cup base “Selling on above High tght _27® down weeks fag “average volume whocomesupwith stock thatcan triple, as long as you get it and checkit thoroughly. It's one thing to buya stock, but another to handle iton the way up with sound rules. So payattention toall the marked-up great historical winners IBD runs inthis space every Wednesday. Learn to recognize the faulty bases to avoid and where you can and should add a sinalleramountto uildyourposi- This is a weaker base that spent 8 months going nowhere. ~~ Apple on 10/20/08 was much stronger and a better choice seconcoo aanneno amano aan 106% woot [cme [wens | ans | sepas | cacus | wares | amos | sepas | orcew | waror | anor | sero | a signs ofleadershiponlyafew days formed a perfect three-week high tion, but only when you're ahead after a key follow-through day in tight flag. and have a cushion. Also, you the general market averages. At that point, I got the idea for must learn when to sell a stock Everyone had just suffered througha five-month-longcorrec- tion in the S&P 500. Ninety percent of all super winners build their bases during market corrections and breakout of one ofsever- al historically classic bases either on the follow-through day or in the next two or three weeks. That's why most investors miss the truly great winners. They're asleep at the switch and not pay- ing close attention because of the priormonth’s poor market action. Google from a longtime associate. He felt it formed a high-tight-flag chart base if we could stretch the prior uptrend from 85, After study- ingthechartand checkingthe huge carnings, sales, return on equity and pretaxmargins, Isaidit’sOK. ‘Now here's a tip for you: You don't have to come up with every big winner yourself. Join an IBD ‘Meetup clubin yourareaanddevel- op one or two friends who are also very serious about using the CAN SLIM system. It doesn’t matter when it closes the week below it's 10-week moving average and when to NOT sell just because it closesbelow thatline. Here are the key known facts at theinitial buy point: © Last3 quartersearnings +87%, +112%, +123% Last 4 quarters sales +173%, +162%, 125% * 2003 Return on Equity 87.8% © 2003 Pre-tax margins 39.3% ©The Google search engine was dominantinits spaceBy William O'Neil RA roe CROCS INC. Weekly Chart New issue $10.50 Crocs manufactures footwear using a proprietary resin materi- 8/15/06 How To Find & Own America’s Greatest Opportunities Follow-through \ Sell: 1 week down to 10-week line and 3 weeks 190 170 \ | ‘SaP 500 why its best to sell on the way up straight up to new high based on sell rules after extended run 80 150 140 130 120 110 100 0 0 Buy: off 10-week moving average line | 60 12 weeks A 50 upinarow occas DN a Sell largest red / 2 volume since Buy /\eshaped cup a beginning of move Ny \ J with nandie Up 20% in first 3 t weeks, so hold & weeks from breakout 4-weeks-tight closes Up over 20% in first week .. 24 from breakout, Must hold .. 22 8 weeks from breakout i Volume for week was 19 Noth? i 134% above average 47 Aa 16 weeks up is ina row 3 i 2 ‘4-weeksttght closes on ----! 1 small weekly price 10 spreads. This is a sign of accumulation in the handle area of Crocs, just 8 before its big advance al called Croslite. The material is known for its lightweight, nonmarking, non- The concerns at the time cen- tered on the staying power of a product in such a specialized niche and the risks of the shoes being a fad whose popularity could fade quickly. ‘The first two quarters after its IPO, earnings and sales were both growing at triple-digit rates. Later in the year, the company fi- nalized a licensing deal with Dis- ney to put characters on its chil- dren’s shoes. pany that manufactured collect- ible accessories to clip on to the shoes. Crocs also expanded its product line to offer a wider selection of models with avariety ofuses. Its important to recognize when things getriskier for a stock Asa stock becomes extended and forms more bases, the likelihood offailure also rises. In Croes’ case, the market had also experienced a huge run and slip and odor-resistant proper- Sei: largest Prices adusted “ tes. Big volume on breakout, fedvolume for 2/1 spit 40 Additionally, podiatristreports 167% above average G) |_ claim the shoes have ergonomic 1 (on 38 benefits, especially for those { y Voure whoare ontheirfeet alot. \ a: yonn.900 ‘Thestock went public in Febru- me ary 2006 at a time of rapid i] 6,000,000 growth, with the shoes gaining 15000,000 inpopularity. 4,000,000 : 2,000,000 +400% |+900% | +1800% | +650% | 4122% |+330% |+170% | +333% | +244% | +205% | +144% EPS %Cng ‘Mar 05 [unos |Sep05 [Dee 05 |Maros |sun06 [Sep 05 _|Dec0s [aro7 | Juno7 [Sep 07 _|DeeO7 Date Croecsalso bought Jibbitz,acom- was due foracorrection. After an earnings report that met estimates, but hinted of a weaker future, the stock saw morethana20% drop in one day. There were earlier sell signals that may have been ignored. This is when you typically start think- ing of all the money you could make if the trend continues, not the money you could lose if the trend is over. That is why using sell rules to sell onthe way upcan helpyou.How To Find & Own America’s Greatest Opportunities By William O'Neil Have you ever been to Chipotle? If you liked it, found it to be always busy and unique, did you think to track CMG’s weekly chart and buy the stock when it CHIPOLTE MEXICAN GRILL (CMG) Weekly Chart the right stock at a proper time, butit’salsotoleam how tomakea biggain whenyou’re finally right! That takes time, probably six months to three years or more in formed aclassic cup-with-handle _ somecases. 200 200 i i 700 Follow-through saP 500 $ ronont : 600 Follow-through one SOS oe Va os 1 Do not sell - below = average volume 360 Lecteeet m0 LDN Do not sell - CMG now at 00 $237 from $92 buy me 260 il HN with handle eo eS Hines capper at towed ne 220 Buy ‘Add - volume up on 100 \ Tebound from 10-week line Ligi_Swedes (tbe rt sell “bslow i me average volume ‘Add - volume up on +0 tight closes \ rebound from 10-week line “ Ast bu “a 120 ae Se /" 10-week cup Reasons to not sell at 237 price and volume reversal at x with handle 1) You now have a big cushion up 145 points and can 100 afford to give stock more patience '2) Typical cup with handle corrects § to 7 weeks and 0 CG's prior two bases only corrected 19% and 17% % 3) 13 weeks up after breakout at $154 is not long enough (18 weeks to be a crossing of proper i channel line or a proper climax top, which also needs o a move of 25-50% or more in 3 weeks or less at the top of the move) 0 Voluve = a . +49% | 489% | +90% | +53% | +33% | 441% 48% | +23% |+12% |+25% +23% [435% | EPS KOR una |Sepce [Dec0a [Mar 10 [sun 10 Sep 10 Dect [Marit [un 11 [Sep 11 Dect) [war 2 ate weekly chartpatterninlate2009? During that time you have to * 6weeks prior to buy point, com- Fach new bull market will have have rules anda sound system to pany announces $100 million 20 to 40 new market leaders with avoid several normal corrections _ buyback of CMG stock great new products or services. or base-building periods that can * Last 3 years average annual EPS (CMG had an IPO at $22 in Janu- easily cause you to be shaken out _ S'owthrate over 40% ary 2006, lateinthepriorbullmar- _ ofa stock prematurely. *Last 3 quarters EPS accelerate ket, andranto $154,provingitssu- CMG is now beginning its third, +50%, +49% +839 periorbull-marketleadership. ‘Then CMG corrected sharply during the two-year major bear market of October 2007 to March 2009. Next it resumed its growth with three big quarters of EPS growth into new high ground and anew16-week cup withhandle. Now, your job isn’t just to buy year of price progress during which time there were 1 such pullbacks or new basing areas. I'll cite rules and principles that can help you avoid selling out during tricky corrections. Vital fundamental facts available and known at the time of the first CMG buy: © New highs in pretax margins at 13% Mutual funds owning CMG in last 3 quarters up from 220 to (332 Cash flow in prior 3 years average 80% more than EPS © Company was a spin-off of Mc- Donald's, a well-managed lead- erintherestaurant industry

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