WHEN THE TAPE FINISHES AND GIVES FINAL SIGNALS The total volume of sales between May 13,1922 , and December 30,1922 , amounted to over 7,000,000 shares. The range of the stock was 114 1/4 to 1413/4. Now, this is where volume tells. Certainly when the capital stock has changed hands fifteen or twenty times in a range of 27 points, after this stock is up over 100 points, there is no question but what distribution is taking place and the stock is getting ready for a long decline. Therefore, instead of investors buying the stock because it pays 10 per cent, and has declared a 25 per cent stock dividend, they should sell out and go short. Now, the question is to determine the position of the stock in January, 1923. After it advanced to 119, it started to decline and short sales would be in order with a stop loss order at 120 to 121. The resistance level at 114 having been broken, the trend of the stock is down, and when it breaks 110, the price made on December 29,1922, it will be in a weaker position and should be followed down until signs of support, both in volume and time, are shown. By time I mean that the stock must hold a resistance level for several weeks without breaking lower. The period of time required to distribute Studebaker was about eight months, or from April to December, 1922. Note the last period of accumulation when the stock sold around 65 and fluctuated between that price and 8o, that the period of accumulation was about six months, or from June to December, 1921, and that the stock advanced 76 points from the low point made on August 25,1921 , and if you count the stock dividend, it advanced about 84 points. This same rule and reasoning should be applied to any other stock that you wish to determine the trend of. During the period of accumulation or distribution, the man who tries to read the tape must get fooled dozens of times and make mistakes in trying to follow minor moves which do not mean anything. Therefore, the correct way to read the tape is to keep up a chart showing moves of from three days to one week and the amount of volume. Of course, you must consider the total outstanding stock and the floating supply. Again I emphasize the fact that the correct way to read the tape and interpret it accurately, is to stay away from it. The truth that the tape has to tell you cannot be told in one day, in one week, or in one month. It begins to tell its story the first day that a stock reaches the buying or selling zone, but it requires time to complete the story; to assemble all of the facts; to finish the accumulation or distribution and give the final signal that a new move is on. Chart No. 3, showing U. S. Rubber at the top of 1919, is an important and valuable example of this. U. S. Rubber. — When U. S. Rubber advanced to 138 in June, 1919, and reacted back to 124, then rallied to around 138 again, holding until August around the same level, it showed that selling pressure was sufficient to stop it. It declined to 111 in September; rallied again to 138 in October, made 139 in November; declined to 113 in November, receiving support 2 points higher than the September bottom. Then rallied to 138 in December and in January, 1920, advanced to 143, or 5 points above the high price made in June, 1919. Now, making a new high, would ordinarily be an indication that it was going higher, but after a stock advances into new territory, if it is going higher, it will continue on up without breaking back below the old top levels. In this case, U.S. Rubber, within a few days, declined to 136 which showed that heavy selling had been encountered; that the new high level was made at the expense of shorts and outside buying; that the selling which started in June, 1919 was still there and that someone was supplying the stock. A rapid decline followed in February, 1920, and when the stock broke below 112, which was under the last support point, it was a signal that distribution had been completed pick stock ~ currency converter |