VectorVest teaches that one of the cardinal rules of investing is to never buy stocks going down in price. The corollary to this rule is, of course, to only buy stocks which are rising in price. Indeed, this rule seems illogical and is totally contrary to what most of us have been taught to do.

All of us are looking for bargains, so it's natural to believe the brokers, Wall Street Wizards and so-called experts on CNBC when they exhort us to buy stocks which are falling in price. Surely, Apple Inc. is a much better buy at $130 a share than is was at $200. Yes, of course it is, but only if it is going up in price. Only if it's going up in price? How do we know that? The simplest way is to check RT. If it is above 1.00, the stock's price is in an uptrend. As of last night, Apple's RT was 0.56. That tells me Apple's price is getting crushed. So I'm not touching this stock.

But wait just a minute. I really love this stock, and Cramer loves it too. He said to buy, buy, buy it clear through to the end of the year. So, phooey on your stupid RT. I'm going to look at a graph and see what's really going on. The Standard graph shows me that Apple closed at $199.83/share on 12/28/07, broke below its 40-day MA on 01/04/08, got an 'S' rating at $159.64 and hit a low of $119.15 on 02/26/08. Since then, it's been working higher. Has it bottomed? Is it on its way back up?

Apple has tested and bounced off of the $120 level, which is just above the low it hit last August, three times. So it appears to have a lot of support at $120. The RT hit a low of 0.38 on 02/07/08 and has been hitting higher lows since then and Apple's price crossed back above the 40-day MA on Tuesday and went above its Stop-Price on Wednesday. Very good!

Now let's see how it looks on a ProTrader Graph. I like to use a 3-Month, Daily graph with Prices shown as Candlesticks, a 30-Day Weighted MA, 9,12,26 MACD and 20-period Detrended Price Oscillator, DPO. Sure enough, Price has crossed above the 30-day Weighted-MA, the MACD is signaling an uptrend and the DPO crossed above 1.00 on 03/13/08. So it sure looks like Apple has consolidated and is moving higher. But wait. RT is still well below 1.00 and that bothers me. Isn't it awful risky to buy a stock with a low RT? Yes, it is, but that's how aggressive investors make (or lose) their fortunes.

Take Mr. Joe Lewis, the currency speculator, for example. He bought a billion dollars worth of Bear Stearns, BSC, right after the sub-prime debacle last August. I heard he bought in at an average price of $130/share. Yup, that must have sounded great since BSC peaked at $170 in January '07. But he made one fatal mistake. He bought the stock on the way down. Stupid old RT was way below 1.00 and the stock had an 'S' rating when he did that. So, Mr. Joe Lewis broke the cardinal rule and bought BSC, big-time, on the way down. When the BSC Board agreed to sell the company last Sunday to J.P. Morgan for $2.00 per share, Mr. Joe Lewis, a.k.a. the boxer, was KO'D.

P.S. On March 11, 2008, Mr. Jim Cramer told his viewers that it would be silly, just plain silly to sell their Bear Stearns stock. BSC closed that day at $62.97 with a 0.48 RT and an 'S' rating. I don't know if Mr. Lewis was watching the show, but it doesn't appear that he was using VectorVest either.