Ticker Tape Trading.....Fellow travelers here directed me to this book on the subject of "reading the tape". Tape reading is essentially a visual analysis of price & volume action in a stock (commodities, too).
Nine principles are presented and I'll list them here. Now Boys & Girls, on reading these many of you will be saying "Oh, I know that -- tell me something I don't know". My reaction on reading some of these was a realization that maybe I'm already reading the tape! Well, this thread is developing into a valuable resource for those just beginning to trade stocks so the info may be new and useful to some.
First, let's give credit where credit is due. Book is Ticker Tape Trading by Kermit C. Zieg, Jr., Copyright 1970, published by Investors Intelligence, Inc.
The 9 principles are:
1. Increasing volume during an advance, with the intervening pauses in the advance or reactions occurring on light volume, indicate that there is underlying demand which is greater than supply. This pattern is an almost sure sign of a continued advance.
2. When there is increased volume at the top of a rally, or of an advance, lasting for a fairly long period of time, with no appreciable gain in price, a turning point is being made and the stock is about ready for a decline.
3. This one was a bit wordy but to sum up, When there is low volume is no time to make a trading commitment, for you have no idea whether the true trend is up or down.
4. When volume rises substantially, it is a sign that somebody knows something. If price rises at the same time, it's a Buy signal; if price falls, it's a Sell signal.
5. Avoid stocks which are rallying just on short covering since upward pressure is likely to be short-lived and a further decline is to be expected.
6. Buy a stock when the tape confirms a rumor; Sell when the news is made public.
7. Determine Support and Resistance levels for the stock and then watch volume and price action as the stock approaches these levels. A breakthrough on high volume is a sign of a large move in the same direction.
8. Do not watch more than a few stocks at a time.
9. Watch the large blocks of stock and do what they are doing.
Okay, there's the book learnin'. We really want to get these principles 'in our bones' though. As Alan observed, that will come in the doing .... by spending time .... lots and lots of time ....
Sherry |
