Mosaic was the No. 1 maker of phosphate fertilizers along with being the No. 3 in potash fertilizers worldwide — and it was a turnaround stock in a highly cyclical industry.
To be a happy investor and make a substantial profit in a newly uptrending market, you must be quick on your feet to spot and buy exactly the right stock at the right time. Look for one that has outstanding fundamentals and an exceptional new product and story you understand.
As stocks continue to go up after you buy, be prepared at some point to hang on through two corrections of 15% to 20%.
This is a stock that you will probably hold over a period of five to six months. It could be 12 months, or in a few cases up to 17 months.
Then you must sell all of the stock on the way up after it resumes and continues its advance.
See Bill O'Neil's Analysis Of The Best Stocks Of All Time
How To Spot The Action
You will use your predetermined, historically proven sell rules to spot when your stock's price action tells you it's exactly the right time to sell. It will be based on one of your proven sell rules — not how you feel, what you think, want, hope for or fear.
It's not easy. It takes time, but you can learn to do this if you have a strong desire and are determined.
On the chart, note the three big volume clues in the nine-week base at the first buy. At point A, B and C, you had an ascending base that corrected three times. Further, each low made at a higher point.
After a stock has about doubled, three weeks is not a base. Also, a July 2007 new high on low volume is a do-not-buy sign.
After three shakeouts to new lows, the stock broke out again from a seven-week base in August 2007 for another move up.
Mosaic Stock: When It Was Time To Sell
Along its move we had two add points where Mosaic pulled back to or around its 10-week moving average. Then, when you're as happy as a lark and sure your stock will keep moving up, you get and act on a key sell signal.
The S&P 500 had already gone through a sharp correction in October and November. Then it rolled over after a weak rally at the end of December.
By the first week of January, there were seven distribution days. The market broke to new lows on accelerating volume.
Meanwhile, late that year the stock ended up at $22. But you were out at close to $100 with a substantial gain.
You can't go by opinions or how you feel. You need to have and follow sound, proven rules.
This column originally ran in Investor's Business Daily as part of a 2012-14 series on America's greatest stock opportunities written by IBD's founder, the late William J. O'Neil. See more stories in this series.