When you see the clouds gather you know that it is a sign of rain, and you seek shelter, because experience has taught you that certain formations of clouds invariably indicate rain or storm. When you see the same signs in the stock market that have always meant distribution in the past, you should take it as your warning, stand from under, and protect yourself against the decline. Likewise, when you see the same kind of bottoms that have always indicated accumulation,
you should cover shorts and buy. You judge a tree by the fruit it bears; in stocks you must judge each by its own signs and signals and not by what other stocks do. When you get an indication and the time comes to buy or sell, place your order at the market; do not limit buying or selling prices. This often causes losses because you miss your market by an eighth or a quarter and thus lose big profits. When it is time to get in or out, never quibble over a fraction; do not lose points by trying to save an eighth.
NUMBER OF TIMES A STOCK FLUCTUATES OVER THE SAME RANGE
Very active stocks and those that are high priced, when they reach a level where the insiders want to unload, make rapid moves up and down for several months over a wide range, which causes traders to buy and sell because there are unusual opportunities. The stock remains around the high level long enough for them to become accustomed to the price and feel safe enough to buy.
Suppose that a stock has advanced 20 or 30 points straight up, without much reaction, and it reaches top. It can not be distributed in one day, one week, or one month, but the sure sign of accumulation or distribution is a stock moving up or down many times over the same range, especially making moves of 5 points or more without getting above its high point, and at the same time not breaking under its resistance levels on the down side. Sometimes a stock will move over the same range anywhere from 10 to 20 times, working up and down.
WHEN TO STAY OUT AND WATCH
If you have been successful and followed a bull campaign up for many months and accumulated a big line of profits, you must be on your guard for the first real indication of a change in trend and the end of the bull campaign. When you get this sign of the end, which, as I have explained, is larger volume and rapid, feverish fluctuations, then get out, watch and wait; that is, sell out your long stocks and wait for the opportunity to go short. Never be in a hurry to get in again once you are out with a good profit. Opportunities always come again in the stock market if you only have the patience to wait for them. Another time when you should get out and watch is after the first signs are shown that a bear market is culminating. It takes time to accumulate stocks and you do not want to get in too soon. If you have made big profits on the way down, you can afford to wait a few weeks or months until the signs are plain that another bull market is starting.
INSIDE INFORMATION
Wide fluctuations occur more often at high levels than at low levels, because distribution is taking place. When stocks reach very low levels after a final drive, they slow down and often work for some time in a very narrow range while accumulation is taking place. Accumulation and distribution are exactly opposite. When the insiders want to sell stocks, they make all the noise possible and do everything to attract the attention of the public and create a large public buying power. When stocks decline to low levels and they want to accumulate a large line, they work just as quietly as possible. They use every means to disguise the fact that they are buying stocks, and do everything to discourage the outsiders from buying them. There is nothing wrong in the tactics employed by manipulators. It is simply business policy, and you would pursue the same policy if you were in the same position. They must buy stocks from some one, and they want to buy them as cheap as they can. Then you cannot expect the fellow on the inside, if he is honest and working for his own interest, to tell you that he is buying. Neither can you expect, when stocks get near the top and he is selling, that he will tell you that he is selling out, because he thinks they are high enough. He would be a fool if he did, because in order to cash in and get his profits, he must sell stocks to some one. So many people believe the only way to make money in the stock market is by getting “inside information.” I can tell you, after twenty years’ experience, that inside information is impossible, and the sooner you get the idea out of your head that inside information will help you, the better off you will be. If you were playing poker with a man, would you expect him to show you his hand, and not expect to see yours? He certainly would not, and you know that he would not. If he did, you would win all his money. Then, why do you expect the man on the inside, whether he be a banker, pool manager, manipulator, investor or otherwise, to tell you what he is doing when he is trying to make a market to sell out a line of stocks or to accumulate a line?
You may be able to find out what he is doing if you can interpret the tape correctly, because it tells the story of everybody’s buying and selling, and it never lies if you know how to read it right, for neither the insiders nor the outsiders can hide or disguise the amount of buying or selling. Every share bought or sold is registered on the tape. If you know how to correctly analyze the volume of sales and space movements, you will be able to tell when to buy and sell.
Very active stocks and those that are high priced, when they reach a level where the insiders want to unload, make rapid moves up and down for several months over a wide range, which causes traders to buy and sell because there are unusual opportunities. The stock remains around the high level long enough for them to become accustomed to the price and feel safe enough to buy.
Suppose that a stock has advanced 20 or 30 points straight up, without much reaction, and it reaches top. It can not be distributed in one day, one week, or one month, but the sure sign of accumulation or distribution is a stock moving up or down many times over the same range, especially making moves of 5 points or more without getting above its high point, and at the same time not breaking under its resistance levels on the down side. Sometimes a stock will move over the same range anywhere from 10 to 20 times, working up and down.
WHEN TO STAY OUT AND WATCH
If you have been successful and followed a bull campaign up for many months and accumulated a big line of profits, you must be on your guard for the first real indication of a change in trend and the end of the bull campaign. When you get this sign of the end, which, as I have explained, is larger volume and rapid, feverish fluctuations, then get out, watch and wait; that is, sell out your long stocks and wait for the opportunity to go short. Never be in a hurry to get in again once you are out with a good profit. Opportunities always come again in the stock market if you only have the patience to wait for them. Another time when you should get out and watch is after the first signs are shown that a bear market is culminating. It takes time to accumulate stocks and you do not want to get in too soon. If you have made big profits on the way down, you can afford to wait a few weeks or months until the signs are plain that another bull market is starting.
INSIDE INFORMATION
Wide fluctuations occur more often at high levels than at low levels, because distribution is taking place. When stocks reach very low levels after a final drive, they slow down and often work for some time in a very narrow range while accumulation is taking place. Accumulation and distribution are exactly opposite. When the insiders want to sell stocks, they make all the noise possible and do everything to attract the attention of the public and create a large public buying power. When stocks decline to low levels and they want to accumulate a large line, they work just as quietly as possible. They use every means to disguise the fact that they are buying stocks, and do everything to discourage the outsiders from buying them. There is nothing wrong in the tactics employed by manipulators. It is simply business policy, and you would pursue the same policy if you were in the same position. They must buy stocks from some one, and they want to buy them as cheap as they can. Then you cannot expect the fellow on the inside, if he is honest and working for his own interest, to tell you that he is buying. Neither can you expect, when stocks get near the top and he is selling, that he will tell you that he is selling out, because he thinks they are high enough. He would be a fool if he did, because in order to cash in and get his profits, he must sell stocks to some one. So many people believe the only way to make money in the stock market is by getting “inside information.” I can tell you, after twenty years’ experience, that inside information is impossible, and the sooner you get the idea out of your head that inside information will help you, the better off you will be. If you were playing poker with a man, would you expect him to show you his hand, and not expect to see yours? He certainly would not, and you know that he would not. If he did, you would win all his money. Then, why do you expect the man on the inside, whether he be a banker, pool manager, manipulator, investor or otherwise, to tell you what he is doing when he is trying to make a market to sell out a line of stocks or to accumulate a line?
You may be able to find out what he is doing if you can interpret the tape correctly, because it tells the story of everybody’s buying and selling, and it never lies if you know how to read it right, for neither the insiders nor the outsiders can hide or disguise the amount of buying or selling. Every share bought or sold is registered on the tape. If you know how to correctly analyze the volume of sales and space movements, you will be able to tell when to buy and sell.
