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The Risk Zone

If you're a growth investor, you often won't be the first to discover a hot prospect. Growth stocks often experience strong price run-ups, then falter, often retracing much of their recent progress. Jumping on a fast-moving stock after it has already made a big move adds risk.

I've settled on an unscientific rule of thumb for determining when a stock is in that condition. I measure the difference between the stock's closing price and its 200-day moving average. It's in the risk zone when the stock price is 50 percent greater than the moving average.


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