check out: 4 Stages of a Market Cycle
However, not all the stocks that are starting to rise from rock bottom are Catalyst stocks, some are actually Main-Board listed too.
Tips:
1. We don't necessarily want to park our money when it is still forming a base, we could end up waiting for forever for the stock to get into Stage 2 (some might never!).
2.Wait for the stock to get into Stage 2 to get the best bang for our buck. But don't wait too long to see a very obvious and established uptrend before we jump onboard.
3. Not all stocks that are emerging from the bottom are created equal. We want to look for certain characteristics that ensure a higher chance of a successful trend. A high level of accumulation by smart money(ie marked increased volume) just weeks (and up to a couple of months) before breaking up is a good sign.
4. The ride can still be volatile! Even in an uptrend, there are pullbacks along the way. If you have already missed the initial breakout, either you wait for a pullback to enter or trade smaller amounts so you can endure any pullbacks that might happen soon after you enter.
5. Take some profits along the way but don't take all too quickly if you spotted a stock in early Stage2. You may end up missing most of the move. Entering is easy, exiting is the tricky part.
6. Lastly, not all trades will pan out as expected, even with charts showing the best odds. We need to cut loss and move on if the stock started to act badly and sunk below near term support levels. Do not hold and pray (and eventually forget). With the right odds, there are many that will work out, why sacrifice the forest for that one lousy tree?
