Yes, high level consolidations add additional strength to a stock. The "smart money" manipulators are at work getting some of the easily frightened public to sell out of their positions in the stock. The manipulators want to have as much of the stock as possible before the stock is allow to go even higher. Then they will be happy to distribute their shares to the public when the stock is near the real top, so the public trader gets caught holding the stock on the way down. We are not manipulators but we just try to ride along on their coat-tails. We have to be able to recognize when the manipulators are trying to scare us out of the stock. That is when we have to hang tough or even add to our position, or it might be a second chance to buy if we didn't already own the stock.
The trick is to see when the manipulators are setting up the action in the stock that is meant to discourage people. Study the difference between consolidation and tops in Ted's book. But remember, all tops are not after many 100% moves. If the formations don't indicate strength for more than 200%, and if, after a rise, the stock price begins to have more jittery up and down moves then it very well may be at the top. Also, the quick, jittery ups and downs have to be viewed relative to the overall price. Most of Ted's examples were for stocks that had risen to high prices but at a lower price top you will still get this type of action but the price swings will not be as big. It takes experience and I am still learning, Just don't fall in love with a stock when it has made a good move and start dreaming of how much money you will have when it goes up another 300%.
That same feeling is what the manipulators want the public to have so they will buy the shares that the manipulators are selling at the top. For the overall market, we see these emotions sentiment for the collective public traders/investors. When most people think the market is going great and they want to buy, it is probably near some type of top.
WEagle |
