The comments expressed here are based upon study and interpretation of available data as it relates to our historical

models of the best-

performing stocks. This is not a prospectus; no effort on our part with respect to sale or purchase of any securities is intended or implied. Any
chart appearing in this material is for educational purposes and is not, and should not be construed as a recommendation or rating to buy or sell
any security. It is possible that at this date or some subsequent date, the officers, directors and/or shareholders of Investor’s Business Daily, Inc.
or their affiliates own securities or buy or sell securities listed in the following pages, or those not mentioned.

© 2010 Investor’s Business Daily. All rights reserved.

Investor’s Business Daily, IBD, CAN SLIM and corresponding logos are registered trademarks owned by Investor’s Business Daily, Inc.

© 2010 Investor’s Business Daily. All rights reserved.

• Why You Need to Spot Market Tops
• Count Distribution Days to Spot a Market Top
Other indicators of topping action:
- Weak, Abnormal Behavior in Leading Stocks
- Low-Quality Stocks Leading the Market
• How to Protect Yourself When a Market Tops

“You absolutely must have a proven, reliable method to

accurately determine whether you’re in a bull or bear
market…This is the most important lesson you can learn
if you want to stop losing and start winning.”

- William J. O’Neil, IBD Founder & Chairman

© 2010 Investor’s Business Daily. All rights reserved.

Why You Need to Spot Market Tops

• When market goes into downtrend, 3 of 4

stocks go down with it.
• By systematically spotting market tops, you
can lock in gains and avoid big losses when
market enters correction.

Spotting Market Tops is Easy

with Investor’s Business Daily
Check Market Pulse graphic in The Big Picture for
changes in market direction.

© 2010 Investor’s Business Daily. All rights reserved.

IBD Shows You When to Get Into – and Out of – the Market
How Investor’s Business Daily alerted readers to major market shifts, 2000 - 2009

© 2010 Investor’s Business Daily. All rights reserved.

Count Distribution Days to Spot a Market Top

What is a distribution day?

When one or more major market index closes down more
than 0.2% on increased volume from prior day.

If you get 5 or 6 distribution days over any 5-week

span, the general market almost always turns down.

Easily Track Distribution Days

See number of distribution days in Market Pulse
graphic on page A1 in Investor’s Business Daily.

© 2010 Investor’s Business Daily. All rights reserved.

 Nov. 2007 Nasdaq Top (Daily Chart)
Day 4: Sells off hard. Closes at
Day 1: Nasdaq hits new
2 4 very bottom of intraday range.
intraday high, but reverses
hard on heavy volume.
1

11/8: Market officially

enters a correction.
Oct. 17 & 18: Bounces back
on good volume. But three
distribution days in less than
3
a week tells you to be
Day 5: 5th distribution day
cautious. 5 in less than 2 weeks.

Oct. 22 & 23: Nasdaq bounces back.

3 But don’t be fooled! 4 prior distribution
Days 2 & 3: Volume on down days warn you to be cautious.
days picking up, a sign that 2
conviction among sellers is 4
growing. 1

Free Online Course

See “CAN SLIM®”  “Lesson 7” course in “Education” section of Investors.com.
© 2010 Investor’s Business Daily. All rights reserved.

© 2010 Investor’s Business Daily. All rights reserved.

Stalling Action: “Heavy Volume Without Further Upward Price Progress”

Stalling Distribution Day

Index closes up for day on volume heavier than previous day,
but price gain is significantly smaller than prior day’s increase.

© 2010 Investor’s Business Daily. All rights reserved.

 Other indicators of a market top:
Watch for Weak, Abnormal Behavior in Leading Stocks
Leading stocks are bellwether for overall market. When
they show weakness, the overall market is not far behind.

Signs of weakness include:

• Late-Stage Bases: If leading stocks are in 3rd and 4th stage
bases, uptrend could be running out of steam.
• Climax Runs: Climax runs in leading stocks may be sign
party is ending.

© 2010 Investor’s Business Daily. All rights reserved.

Late-Stage Bases
Qualcomm’s Run Up, 2003 - 2005 3
1. 1 stage base is a double bottom with handle.
st

2. Base on base formation. All count as 2nd stage base.

3. Breakout from 3rd stage base fails immediately.
4. 29% correction undercuts 3rd stage base. Resets base count.
2 4
2
Buy 2

1 Beware of Late-Stage Bases

• Best to buy a stock in its 1st or 2nd stage base.

• 3rd stage bases can work, but chance of failure increases.

• 4th stage bases have high probability of failure. Best to avoid them.

Free Online Course

See “Charting the Course”  “Counting Bases” in “Education” section of Investors.com.
© 2010 Investor’s Business Daily. All rights reserved.
© 2010 Investor’s Business Daily. All rights reserved.
Climax Runs 3
May 2006

4
Climax Run Checklist
1. Stock goes up 25% to 50% in 1 to 3 weeks after advancing significantly 1
from its original base over many months (usually at least 18 weeks from a
first- or second-stage base; 12 weeks or more from later-stage base)
2. Closes excessively (more than 100%) above 200-day moving average
3. Widest weekly price spread since breakout
4. Exhaustion gap

Free Online Course

See “Sell Signals”  “Climax Runs” course in “Education” section of Investors.com.

© 2010 Investor’s Business Daily. All rights reserved.

 Other indicators of a market top:
Low-Quality Stocks Leading the Market

Watch out if:

Stocks that led current uptrend falter

Lower-priced, lower quality, speculative stocks start
to lead

If the best stocks can’t lead the market higher, the

worst ones certainly won’t do so for very long.

Leaders Up vs. Leaders Down

If “Leaders down in volume” start to regularly
outnumber “Leaders up in volume” in Market
Pulse, it may mean market is topping.

© 2010 Investor’s Business Daily. All rights reserved.

Holder Beware! Even leading stocks fall when the market tops.
How selected market leaders fared when market went into correction in Nov., 2007

© 2010 Investor’s Business Daily. All rights reserved.

Google at 2007 Market Top Google Daily Chart, 10/07 – 3/08

10/12/07 11/8/07

Overall Market: Overall Market:

Distribution Day 1 Enters correction

Google: Google:
Hits new high than Sells off on big volume.
pulls back. Declines 45% over next
4 months.

10/15 & 10/16/07

Overall Market: 10/24/07

Distribution Days 2 & 3
Overall Market:
Google: 5th distribution day in less
Pulls back. Still well above 50-day than 2 weeks
moving average line, but distribution
days mounting on Nasdaq. Google:
Closes near new highs,
but forming “railroad
10/19/07 tracks”, a sell signal that
often occurs at end of a
Overall Market: stock’s price run.
Distribution Day 4

Google:
Hits new intraday high on big
volume, but pulls back to close near
bottom of day’s range. “Heavy
volume without further upward price
progress.”

© 2010 Investor’s Business Daily. All rights reserved.

 Focus on technicals when selling.
Fundamentals (earnings & sales growth, return on equity, etc.) for leading stocks are often good
when market tops and stocks begin to fall. If distribution days are mounting and the stock’s chart
shows weakness, use defensive selling. Don’t wait for fundamentals to show weakness.

2007 – 2008
Don’t Be Fooled by Good Fundamentals Google Daily Chart
At 2007 market top, Google showed good earnings
& sales growth even as its stock price dropped.

© 2010 Investor’s Business Daily. All rights reserved.

How to Protect Yourself When a Market Tops

• Cut ALL Losses Short

Regardless of market conditions, always sell if a stock drops 7% - 8%
below your purchase price. Sell even sooner if distribution days are
mounting and your stocks are showing weakness.

• Get Off Margin

Play it safe and don’t compound any losses by staying on margin.

• Lock In Your Gains

During the early phase of a bear market, certain leading stocks may
seem to hold up. But don’t be fooled! Most will eventually fall with the rest of
the market. Be sure to proactively lock in some or all of your gains.

© 2010 Investor’s Business Daily. All rights reserved.

How to Spot a Market Top Using Investor’s Business Daily

• Read The Big Picture Every Day

- Check “Current Outlook”: Did it change to “Uptrend under pressure?”

- Check number of distribution days
- How are leaders behaving?

• Check IBD’s How’s The Market? Page

- Track daily action with large, easy-to-read charts for major indexes
in “How’s The Market?” page in Making Money section of IBD.

• Watch the IBD Market Wrap Video

- Watch an IBD expert review charts of major indexes and analyze
current market direction
- Get insight into strength or weakness of leading stocks

© 2010 Investor’s Business Daily. All rights reserved.

Coming Next Month…

Lesson 2: How to Spot Market Bottoms

You’ll learn:

How to tell when correction has ended and it’s time to buy stocks again

How to spot a follow-through day, and signs that it’s likely to succeed or fail

The right way to get back into the market when new uptrend begins

…and more!

Stay in Touch!
Get the latest updates from IBD on Twitter and Facebook!

facebook.com/investorsbusinessdaily twitter.com/IBDinvestors

© 2010 Investor’s Business Daily. All rights reserved.

The comments expressed here are based upon study and interpretation of available data as it relates to our historical models of the best-
performing stocks. This is not a prospectus; no effort on our part with respect to sale or purchase of any securities is intended or implied. Any
chart appearing in this material is for educational purposes and is not, and should not be construed as a recommendation or rating to buy or sell
any security. It is possible that at this date or some subsequent date, the officers, directors and/or shareholders of Investor’s Business Daily, Inc.
or their affiliates own securities or buy or sell securities listed in the following pages, or those not mentioned.

© 2010 Investor’s Business Daily. All rights reserved.

Investor’s Business Daily, IBD, CAN SLIM and corresponding logos are registered trademarks owned by Investor’s Business Daily, Inc.

© 2010 Investor’s Business Daily. All rights reserved.