Here's the situation: You just completed your research on a few companies and their stocks. Fundamentally, you made sure each had a big idea and the potential for fast sales and earnings growth. Technically, you noticed each had a strong RP line and price chart. So, with some cash to invest, you took the plunge and bought a couple of stocks.

Now what? Well, after buying a stock, the next step in your ownership lifecycle is holding a stock. And that's what lessons three and four are about. As the title states, this lesson will describe what you should be focusing on when holding on to a great growth stock. The coming lesson will talk more about the goals of holding a stock (specifically, gunning for big profits and practicing patience). After reading both, we're confident you'll be much better at holding on to stocks for as long as their major growth phase is intact.

The one thing you need to follow
In our opinion, a major reason that people get attracted to the stock market is the myriad factors that influence the market. If you read the newspaper each day, you'll find articles about inflation, interest rates, the U.S. dollar, the Fed, money supply growth, international economies, housing activity, federal budget deficits or surpluses and more. Many of these articles tend to focus on how all of these factors will impact the stock market.

Moreover, there are plenty of articles that relate to specific industries or even certain firms. These usually mention how trends in the economy or an industry could help or hinder some companies and their stocks. And some of those stocks are ones you own! After finishing a newspaper or two, many investors are unduly influenced about a stock or an industry, sometimes to the point of buying or selling because of it. This is NOT the right way go about investing.

We know for a fact that, instead of guessing (and that's really what it amounts to) the effect that numerous fundamental factors will have on your stock, the best thing to do is simply watch your stock. Doing this will help you determine if your stock is being accumulated or distributed, which is the only thing you need to know! Why? Because the only way to tell how all of the fundamental factors will influence your stock is by simply watching the stock itself.

Here in the office, we always remind each other to "stay focused on the market." While that may sound obvious, sometimes it's tough to do considering the two or three newspapers and dozens of online articles we read through every day. Now most of those articles don't simply relay news…they also give opinions. So we make sure to keep our focus on our stocks and not let the various opinions get in our way. After all, if the stock is heading higher, who cares what one or two people think of our stock, its industry or the market?

Welcoming bad news
As a matter of fact, we welcome bad news about our stocks. Of course, we're not talking about actual bad news, such as a drop off in earnings or business. We mean negative opinions (which are often confused with news) about our stock. When a few analysts or commentators dislike a stock we own, that's fine with us. We've learned from experience that a great growth stock (as well as the market as a whole) doesn't top until most investors believe it's a good investment. It's simply the theory of contrary opinion -- the fewer bulls there are, the less the potential buying power to push the stock higher.

Therefore, we don't mind one bit if some analysts or commentators that our stock isn't a good buy or is even worth selling. These types of opinions breed skepticism, which is what growth stocks thrive on.

In sum, you shouldn't focus much on the media one way or another. The only thing to affect your judgment of a stock should be the stock itself.

What to watch for in your stock
This part actually ties in somewhat with our selling lessons, which will tell you how to detect a loss of momentum. But we thought it would be helpful to briefly bring some things to your attention now.

Once you know to only watch your stock, what exactly about the stock should you watch? Simple. You should be examining your stock to see if it continues to show the same type of positive technical patterns that attracted you to it in the first place.

First and foremost, watch its RP line. If the RP line is hitting a new peak every week or two, just hang on tightly and enjoy the ride. This type of RP line is telling you that your stock is under intense accumulation (assuming the broad market is healthy), which should eliminate any thoughts you have of taking action. And even if there were the occasional four to five week correction, we wouldn't worry at all.

Next, you want to watch the price action of the stock. Is the price itself hitting new highs along with the RP line? If so, then go outside and enjoy the weather. Again, like the RP line, it's reasonable to see the price pullback for a few weeks. But the shorter and shallower the corrections, the better the situation. Importantly, keeping an eye on the price of your stock helps you determine its actual supply/demand situation…unlike the RP line, which, if the market is falling, can actually move higher even as the stock loses ground.

Of course, another part of the supply/demand situation for your stock is its volume patterns. You want to see volume rise when the stock rises, and volume ease when the stock eases. If that's the case, your stock is under accumulation and can continue to move much higher.

Other than that, you shouldn't be analyzing much else. Just as others' opinions can affect your judgment, so can a slew of technical indicators, such as a stochastic, MACD histograms, candlestick chart patterns, etc. You can always find a reason to be bullish or bearish on a stock or the market, and often times searching for them can cloud your thoughts. Our advice is to stick with the stock's RP line, price chart and volume pattern.

Aiming for big winners
Our next lesson will talk about what goals you should have when holding a great growth stock. But we felt it was important to present this lesson, focusing on what you should (and shouldn't) study when analyzing your stock, before the next one. Why? Because until an investor understands s/he should shut out all the "noise" out there, it becomes impossible to formulate, never mind reach, an investment goal.

And if you can't reach a goal, you'll never be able to attain the big stock market winners that make all the difference to your portfolio over time! More on that in the next lesson.

Lesson 8. Holding Great Growth Stocks: Practicing Patience

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