BUYING HIGH-PRICED STOCKS When a stock starts to advance, say from around 100, which is its normal level, it will meet with a lot of selling every five to ten points up because people who think it is high enough and have profits, sell out. If it continues to advance, most all of the public will sell out. Then, the professionals and the public will decide that it is too high and start to sell short. They all look for a reaction, but it does not come. The stock continues to advance until it reaches a level where all the shorts have been so badly licked that they cover up and quit. A lot of people after seeing a stock advance from 100 to 200 become convinced that it is never going to stop going up and they buy. The result is that at a high level a weak, long interest is built up, and the short interest run in, and, of course, the stock eventually starts on a long decline. Often people who believe a stock too high at no will think it cheap enough at 18o, after it has reacted from 200. You can always make money buying high-priced stocks when every body is getting out because they think they are high enough for a reaction. This is why stocks halt and react at low levels and then when they get to high levels, rush up fast and react very little, because the stock has been absorbed and the selling pressure is no longer encountered. Of course, all stock must eventually reach a level where distribution will take place, and supply exceed demand, as the only object of any one buying stocks is to sell them again. The big money is made in the last stage of a bull market when prices are feverishly active, and the big profits on the short side are made in the last stage of a bear market when everybody wants to sell and nobody wants to buy. STOCKS THAT ARE YOUR ENEMIES Any trader who has followed the market for ten years or more and has been an active trader, if he will carefully analyze his trading, will find that there were certain stocks which he was never able to make any profits in. He always seemed to get in too soon or too late. No matter if he sold them short or bought them he always ended up with a loss, while other stocks always seemed to favor him, so much so that he would call them his pets. Now there must be some cause for this, as nothing just happens. Everything is the result of a cause. When you find that a stock does not seem to work well for you, leave it alone. Quit trading in it, and stick to the ones that favor you. I could explain to you the cause for this, but it is not necessary, and many of you would not believe it. My own experience in trading and my analysis of the cause of effects enabled me to discover the reason for these things. For many years Mex Pete was one of my particular pets. I could always make money in it. My forecasts on it were so accurate that people all over the country who subscribed to my market letter called me the "Mex Pete Specialist." I was able to catch its moves up and down over 90 per cent of the time just the same as if I had been making the fluctuations myself. Many other stocks work just as well as this for me, while others do not favor me and I have never made any money out of them. It makes no difference whether you know or do not know the reason why a thing works or does not work; just as soon as experience teaches you that there is something that works against you, the only thing to do is to quit. trade stock online ~ forex strategies |