Investor's Quiz: Joy Global Displayed Some Classic Sell Signals As It Reached A

On Tuesday, we showed you a chart of Joy Global's (NasdaqGS: - ) peak and plunge and asked you how many warning signs or problems you could spot.

The stock broke out of a base in November 2005, and by April of the following year it had more than doubled in price.

But in mid-April it logged a string of new highs in light volume -- a bad sign (point 1). The low volume showed you there wasn't a lot of institutional buying powering its move.

Not surprisingly, Joy Global couldn't hang on to its gains.

On April 27, the stock suffered its biggest one-day price drop (11%) in years, as volume spiked higher (point 2). That sell-off showed you that big institutional investors like mutual funds and insurance companies were heading for the exits.

Despite their departure, Joy Global briefly found support at its 50-day moving average, then tried to climb higher.

On May 11, the stock again tried to move north, then reversed to close down for the day (point 3).

Yet another warning sign came on May 15, when Joy Global sliced through its 50-day moving average line on the heaviest volume in more than three months (point 4). Stocks that suffer such drops often take months, if not years, to recover.

If you hadn't sold your shares and locked in your profit, now was the time to do so.

Joy Global continued to trudge lower over the next two weeks.

It did eventually manage to find support along its 200-day moving average. But its rally attempt in the days afterward came on anemic volume and soon failed (point 5).

By late September 2006, the stock had fallen 57% from its April peak.

In summary, Joy Global's warning signs before its ultimate breakdown included:

A downside reversal on heavy volume.

High-volume drops below its 50-day moving average line.

New price highs on low volume.

A one-day price drop that was the biggest of the stock's run.