Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market: How to Achieve Superperformance in Stocks in Any Market

by Mark Minervini

STAGE 1—THE NEGLECT PHASE: CONSOLIDATION Stage 1 is when nothing noteworthy is happening. The stock is in a period of neglect; few big players are paying attention to the stock, or at the very least, the market has not yet paid up for the company’s shares. During stage 1, a company’s earnings, sales, and margins may be lackluster or erratic along with its share price. There may also be an uncertain outlook for the company or its industry. Nothing electrifying is happening to push the stock out of its doldrums and attract the needed institutional volume support to move it decisively into a stage 2 uptrend. Stage 1 can last for an extended period, from months to years. Stage 1 can also be caused by a poor overall market environment. During a bear market decline, even stocks with good fundamentals can mark time and do nothing or even decline along with the overall market. You should avoid buying during stage 1 no matter how tempting it may be; even if the company’s fundamentals look appealing, wait and buy only in stage 2. Remember Newton’s first law, the law of inertia. An object in motion tends to stay in motion, and one at rest continues at rest. If your stock is dead in the water, guess where it’s most likely to stay until something significant changes. You’re not going to achieve superperformance by sitting with dead merchandise. To compound capital at a rapid rate and achieve superperformance, it is vital that you avoid stage 1 and learn to spot where momentum is strong...

These stages seem to be the core of the book