Cyclical Stock

Before we move on, let me say a few things about cyclical stocks. This
category of stocks (in my opinion) offers stock market investors one of
the best money-making opportunities of all time. In addition, the amount
of risk can be very minimal if you stick with good quality stocks.

Many low-price stocks cycle up and down as many as two or three times
a year. Many have a history of falling to a 52 week low and then bouncing
back up within a predictable period of time. Some cycle up off that 52
week low only moderately, while others take off on truly wild rides.

Make no mistake about it. We'll be looking at low-price stocks that cycle
up and down as way to nail down some profits. I think that this is one of
the most consistent and reliable ways to make money with common stocks.
Small stocks that cycle up and down can offer some very good returns.

There are also quite a few small-cap companies that have brand new
products which are about to be announced. The common stock of a small
company like this can take off on a tear to the upside very quickly. The
same thing can happen on good sales and earnings announcements.

There are a multitude of reasons for a stock to go up. There are just as
many reasons for stocks to fall in value. Let's cover a few right now.

1st Reason! There are more sellers than buyers! That's simple enough.
So why does anyone want to sell a stock (other than taking a profit) .. ?

2nd. The stock is a dud. Investors are just tired of waiting for good news.
Loosing patience is the best way to put it.

3rd. Officers of the company (insiders) start selling off their shares. Many
investors think something is wrong when insiders start selling.

4th. Big institutional investors start getting out. They usually hold huge
numbers of shares. (teachers pension fund money, etc). The very large
number of shares being sold depresses the stock price due to the above
average amount of stock for sale.

5th. Tax Selling. Investors who had big gains on some of their stocks will
sell their losers. This lessens their tax liability.