Tips on How to Use the IBD 50 and Other Stock Screens

To gauge overall market health, you want to:

• Check the daily & weekly charts for the Nasdaq Composite and S&P 500
• Read The Big Picture and Market Pulse
• Track the behavior of leading growth stocks

On this week’s show. we focus on the third element: Tracking the action of the top growth stocks, particularly those on the IBD 50. Regularly watching the market leaders is an excellent way to:

• Spot changes in market trend
• Find stocks before they break out
• See when it’s time to switch to defense and take profits

Create — and Stick to — a Regular Routine

The how, what & when of the process is up to you, but key point is to check the top stocks on a regular basis, at least once a week. It’s one of the best ways to make sure you stay in sync with — and get timely alerts to — any changes in the overall market trend.

On this week’s show. Amy and Matt explain how they review the IBD 50, which gets updated in the Monday and Wednesday issues of IBD, and other screens.

Matt also shows how he divides the IBD 50 into five columns to help get a sense of how the top 50 growth stocks are doing, and how that matches up with the behavior of the major indexes. Here are the five columns:

• Strong: This category is for stocks that are just cruising right along, showing healthy action. Virtually all of these stocks will be extended (i.e. currently beyond a proper buy zone).
• Breakout & Buy Zone: For stocks that recently broke out and/or are still within buying range.
• Test: For stocks that are testing a key benchmark, such as the 10-week or 50-day line. Keep an eye on these to see if they find support or head lower.
• Bases: Put stocks that are forming a cup-with-handle, flat base or other pattern. You can add the most promising stocks to your watch list.
• Breakdowns: For stocks that have sold off significantly on heavy volume.

Whatever process you use and whichever stock screens you decide to review, you’ll find regularly tracking the market-leading stocks is an invaluable way to really stay in tune with the market. It will help you accurately gauge current trends and help you decide when to buy, sell and hold.