An interesting look at stock cycles:

The Stock Cycle
Do you consider yourself a normal human being? Do you feel emotions, avoid pain and pursue those things that make you feel good? If your answer is "yes" then the good news is that you will get along well in society.

The bad news is you are likely not doing as well as you could with your investments.
There is a cycle that stocks go through that you need to understand. Where you fit on the cycle determines your level of trading acumen.

The Basing Period
The stock goes sideways and offers very little excitement to investors. It is the long term believers who own the stock and there is little going on with the company to attract new attention.

The Doubtful Period
One day, the stock starts to go up for no apparent reason - there is no news and the media has not reported anything promising. I call this the "doubtful" phase because most investors will doubt that the stock has any good potential. Many of the longer term investors will start to sell in to strength during this phase with the thought that they are getting a good exit price after such a long period of sideways trading. The strength in the stock is driven by those who have the best information on the company and are buying because they have learned that there may be significant fundamental change underway. This is the time when the savviest of traders buy.

The Accumulation Period
Next, the time when the stock continues to go higher and starts to attract some attention from speculators. Trading volumes increase and there may be rumors of good things happening at the company, possibly even some news has been released to the public. However, it is still a relatively unknown story that the media and the general public have not picked up on. Most investors still do not consider the stock in this phase but may be watching the stock with more interest and less doubt. Good traders are buying here.

The Markup Period
More people learn about the company's improving fundamentals and buy the stock because its price appreciation gives legitimacy to the story. There is still doubt about the company's positive future because the news does not seem to support the move higher and that causes many rookie traders to pass on the stock

The Rocket Period
The positive change in the fundamentals are now widely known, the stock is going up rapidly and investors are buying the stock aggressively. Volume is strong as the crowd is now in favor of the stock with the rookie traders piling in.

The Blow-Off Period
The upward trend goes parabolic, volumes are huge and people are buying more because of their fear of missing out than because the company fundamentals justify the price ascension. The buyers are primarily inexperienced investors who follow mainstream sources of information or tips from friends who bought in an earlier phase. The stock makes its top

The Breakdown Period
Those who bought in to the story early sell in to strength and take profits. This causes a break of the steep upward trend. While the stock shows some weakness, the majority of investors continue to hold their position because the company fundamentals are positive.

The Second Try Period
The weakness that comes during the initial break of the upward trend makes some investors think the stock is a bargain and they buy with grand expectations that the upward trend will continue. However, with a lack of new money coming in to the stock, this price rally is short lived and the stock fails to make a new high, instead making a falling top. Early investors continue to sell in to this strength.

The Exit Period
As selling pressure intensifies, more investors run for the exit door, causing the stock to break its long term upward trend line after the formation of the falling top. Investors who got in to the stock late have doubts about the weakness because of their emotional desire to avoid taking a loss and they continue to hold. They hope for a turnaround that never comes.

The Panic Period
Mass exodus from the stock causes investors to sell in a panic and at a big loss, sending the stock sharply lower and below its true fundamental value. Investors are motivated more by their fear of bigger losses than by their rational assessment of the company's value.

The Bounce Period
The downward trend goes parabolic as the panic sellers clear out of the stock. Bargain hunters well versed in the company's fundamentals buy it and the stock bounces higher before stabilizing at a price that reflects a fair value for the company. The stock then enters what could be a long period of sideways trading during its basing period.
Most investors buy stocks too late because they are normal human beings. They want to see proof, they use the recent past to judge the future and they get caught up in the emotions of a stock moving quickly higher.

To overcome being normal, you have to think abnormally. Recognize that the stock market is not fair and that some people get better information about stocks than others. Follow what these people are doing by buying stocks when they start to go up with good volume after periods of sideways trading, especially when the publicly available information does not seem to support the price increase. If you wait for the news to justify the price, you are a dinosaur.