By Michael Cintolo, Editor of Cabot Market Letter and Cabot Top Ten Report
From Cabot Wealth Advisory  11/26/09 Sign up for free Cabot Wealth Advisory e-newsletter 

Here are 10 nuggets to put in your investing toolkit. These tips won't be new to longtime readers, but I think it's always helpful to review classic investing advice from time to time, especially as we approach year-end. And for new readers, these lessons will help set you on the path to investing success.

1.  Most big-winning stocks advance for 12-24 months, from their breakout to their top: In other words, if you've owned something for more than a year and it's been pretty much straight up, the stock's likely in the latter stages of its advance. True, some great stocks (take Apple, for instance), can go up longer, but even then, the stock tends to have a very nasty (50%+) correction, something that's hard to sit through.

2.  Most big winners in new bull markets are new stocks: By new, I mean most stocks have come public during the past few years and did NOT enjoy spectacular run-ups during the prior bull market. We saw much of the same this year with little-known names making big gains. A corollary of this is that only one or two out of 10 leaders of the last bull market end up leading the next bull market.  It's possible, but unlikely.

3.  The best stocks begin their runs when they break out to new 52-week highs: When a stock is moving up off its lows it's tempting to jump on board.  However, these stocks move quickly and hit resistance quickly. So to make money on these names you either have to buy early (not recommended) or have impeccable timing (difficult). Contrarily, the biggest winners have chewed through all potential sellers, and begin their moves from their breakout into new-high territory.

4.  The biggest winners will break out to new highs within a few weeks of a market low: If you're buying a bunch of beaten-down stocks after a major market low, you'll probably do OK ... but you won't own any true leaders, and your performance will eventually lag.

5.  The 50-day moving average will contain most of a great stock's intermediate-term advance:  Usually, once a winner gets going, it will find support a couple of times at the 50-day moving average. If your stock breaks decisively below its 50-day line, it's probably time to sell at least some of your shares.

6.  If an entire group is strong for many weeks, and then most stocks in the group suffer their biggest drops in many weeks, then a top is likely in: A classic example was commodity stocks in early July 2008. This action could give you an early-warning sign, instead of waiting for the trailing 50-day line.

7.  A big move (more than 10%) the day after an earnings release usually leads to more movement in that direction: Nobody likes to sell after their stock has just been crushed 20% on an earnings announcement, but that's often the best thing to do. Same goes on the upside--a large move higher on earnings is often buyable (if the market is healthy, of course). The bigger the move, the more meaningful it is.

8.  "Strong then Tight = Flight":  This is a great rule of thumb. If you see a stock consolidate for a week or weeks, then break powerfully to new highs (Strong), and then trade in a tight range, say, within 10% for couple of weeks afterward (Tight), it's usually a sign that big investors are still accumulating shares, and the next big move will be up (Flight). This is one of my favorite set-ups.

9.  A stock split (or stock split announcement) will often mark a meaningful top for a stock: Most investors, for some reason, have been trained to think of stock splits as good. But if your holding has been advancing for many weeks (at least a couple of months), and then spikes on stock-split news, you're usually better off selling at least some of your shares.

10.  Good stocks can go bad in a hurry in bad markets:  Last but not least, you should always keep in mind what the market is doing. Is it trending lower? If so, no matter how good the set-up, you're more likely to lose money. If it's trending higher, it'll be like running with the wind at your back. Using the 50-day moving average on the major indexes is a simple-but-good way to know whether the trend is up or down.

Now, these rules aren't perfect, but if you print these out and refer to them, I guarantee they'll improve your performance going forward.

Click here if you'd like more information on Cabot Market Letter or Cabot Top Ten Weekly.

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