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Look For Less Volatility In Stocks Making Bases.(A)(INVESTOR'S CORNER)

Investor's Business Daily

| December 02, 2002 | COPYRIGHT 2002 Investor's Business Daily, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)Copyright

Byline: CRAIG SHAW

A wild ride can be fun when it comes to roller coasters or race cars. But when it's your stock shaking you silly every day, the experience can leave you queasy.

Some stocks show wider daily and weekly price swings than others. All things considered, it's better to buy a stock that has shaped a calmer base. Steady progress up the right side of a base shows institutions slowly building positions.

The market indexes themselves have become more volatile over time. As trading volume increased in the 1990s tech boom, so did price swings.

It used to be you had to call a broker to buy or sell stocks. With the advent of online trading, anybody with an Internet connection and a couple of thousand bucks can snap up shares. Mutual fund enrollment has also swelled. All those new players boost volatility.

The accompanying chart shows the Nasdaq composite's average weekly swings for the past six years. As the graph illustrates, volatility soared in 2000 as the tech bubble peaked and popped. It's about half that level now, but still above 1998 and 1999's rates.

The best way to beat volatility is watch a stock carefully and sell if it violates key support lines or shows topping signs. Mastering sell signals lets you hold a ...

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