BEST WAY TO DETECT TREND
Years of experience have convinced me that the trend can be detected by a
study of charts.
Monthly Chart: The best chart to use for detecting the main trend of a stock
in the Monthly high and low Chart.
Weekly Chart: The Weekly high and low Chart is the next best guide to the
real trend of a stock.
Daily Chart: When a market is moving very fast and is very active on large
volume, the Daily high and low Chart is good guide and trend detector.
To detect when a stock is getting into strong position and ready to advice,
look up the Monthly Chart. I there is good support and good buying, then the stock
will gradually be absorbed and as it grows scarcer and the demand increases, it
will work higher and receive support at a higher level, making higher bottoms and
higher tops.
When a stock is getting ready to change trend to the downside, it will start
making lower tops and lower bottoms: then when it breaks below the point from which
is made the last run up to the top, is will be an indication that the main trend
has turned down.
KIND OF STOCKS TO TRADE IN
The kind of stocks to trade in are those that are active and those that
follow the rules and a definite trend. There are always queer acting stocks and
some stocks that don't follow the rules. These stocks should be left alone. Stocks
that hold in a narrow trading range for a long time should not be traded in until
they break out on the upside or break bottoms on the downside and show increased
volume of sales and activity.
WHERE TO BUY AND SELL
You should buy a stock near a single bottom, a double bottom, or a triple
bottom and place a stop loss not more that 3 points away. By buying near a single
bottom, I mean that after a reaction you should wait a stock holds around a level
for 2 to 3 weeks, then buy and protect with a stop loss order 3 points under the
lowest week, or in active markets if a stock reacts and then bolds around a level
for 2 to 3 days, buy and protect with a stop loss order not more than 3 points
under lowest day. When the stock sells around the same price level several weeks,
several months or a year or more apart, it forms a double bottom and is a buy. If
it sells around the same level the third time, it is a triple bottom.
When a stock advances in a new high levels or crosses a former old top by 3
points then if it is going higher, is should not react back 3 points below the
former old high. Then you should buy on a slight reaction of 1 to points and place
a stop loss order 3 points under the old top.
After a bull market gets started, buy on a reaction and place a stop loss
order 3 points under the previous support level.
After a stock cross the top of a previous year by 3 points, it is a buy on
any little reaction. For example:
Douglas Aircraft: 1932 high 18 5/8. 1933 high 18 1/4. In 1934 when it crossed
this double top, according to the rule you would buy. Refer to Chart No. 1 on page
16. The stock advanced to 28 ½ in 1934. Then in 1935 after Douglas Aircraft crossed
28 1/3, it never reacted lower than 26 ½. Therefore, when it reacted hack below 28,
it was a buy with a stop at 25 ½. It is significant to note that after Douglas
crossed the old high of 28 ½, it never reacted 3 days (the reactions only lasting
about 2 days) before the stock resumed its upward trend. When is crossed the 1929
high at 45 ½, you would buy again and continue to pyramid as long as it showed
uptrend. The stock advanced to 58 3/8 in December 1935.
