MISJUDGING THE TIME OF ACCUMULATION OR DISTRIBUTION It requires different lengths of time in various stages of the market to accumulate or distribute stocks. A pool may form in the early part of the year and buy a large amount of stock, expecting a spring rise. The advance comes in April or May, and the pool sells out, distributing its line of stock to the public. A break occurs in June or July and the public gets scared and sells out the stocks they bought at the top. Then this same pool, or another one, buys back the stocks, and another advance comes. This may go on for three or four different times with the stock being distributed at the different stages, which are only minor periods of dis tribution, and finally when the extreme high or final zone of distribution is reached and everybody is so bullish, the stock is distributed for a long bear campaign. The same occurs on the way down. The market halts and holds at one level for some time, then rallies, where the bears put out a line of shorts and the stock continues down ward, going through two or three different stages of liquida tion before the final stage is reached where accumulation takes place for another big bull campaign. This is all fully shown on the Charts Nos. 11 and 12, showing the different tops and bottoms on the Averages of the railroad and industrial stocks. Bull or bear markets all move in sections of three to four waves up or down, individual stocks working out their high or low points according to their Time factor and individual vibrations. See chart on Industrial Alcohol which shows the different levels or sections on the way down. Each resistance level might have been considered a bottom, but it was only a temporary bottom, as it shows plainly that it failed to make higher tops on each succeeding rally. Many stocks will halt near the end of a bull or bear cam paign and make a level which looks like accumulation or distribution, and appears to be the final top or bottom, but if the public buy heavily, or shorts all cover around a level of this kind, there may be built up, even at a very high or very low level, a weak long or short interest which will cause a final drive making the final top or bottom, as the case may be. Often when stocks are nearing final top, professional shorts will put out a big line of short stocks; then something will occur to cause them to get scared and start to cover, and their buying, together with public buying, will force prices to a level a little higher than previous tops, all of which is plainly shown on the charts Nos. 11 and 12 on Rails and Industrials. This rule is also fully explained in the example given in regard to Retail Stores and its bottom of December, 1920, and the next bottom February and March, 1921. stock trading advice ~ unclaimed money |