VOLUME Do not overlook the volume of sales, for this is what tells whether supply or demand is strong enough to move the stock up or down. Consider the daily, weekly, and monthly volume of sales according to the total amount of stock out standing. For instance: If you look up U. S. Steel for the last three months of 1922, you will find that it was in a narrow range for several weeks and the total sales only 300,000 shares. You can not expect any big movement will take place either way immediately. Why? Because there are five million shares of U. S. Steel and one million or more shares must change hands before any big move will take place from any resistance level. The greater the volume of stock the longer the time required to accumulate or distribute a line sufficient to cause a long swing move up or down. WHAT VOLUME TELLS The volumes of sales on each individual stock show the percentage that is being bought and sold. That is why the tape and fluctuations tell the truth, provided you interpret the tape correctly. Certainly a stock cannot be distributed or accumulated without a large volume of sales. Some one must buy and sell a large per cent of the capital stock near bottom or top in order to cause a big move in either direction. Therefore, study volume closely, the time required to sell a large amount of stock, the number of points which it moves up or down while the volume of sales is accumulating. Suppose U. S. Steel has advanced 20 or 30 points, and it reaches a level where there are 200,000 shares in one day, but the stock only gains one point. The next day there are 200,000 shares and it makes no gain. This is plain enough that at this point the supply of stock exceeds the demand, or at least that buyers are able to get all the stock they want without bidding prices up. In a case of this kind, the wise thing to do is to sell out, watch and wait. If all the stock at this level is absorbed after a reasonable length of time, and it moves up to new high prices, it will then, of course, indicate still higher. In a big bull market, when stocks reach the distributing zone, they will fluctuate over a wide range and the volume of sales will run several times the total outstanding capital stock. For instance: In the latter part of 1919 and spring of 1920, Baldwin Loco. sales ran from 300,000 to 500,000 shares per week, while the stock was fluctuating between 130 and 156. This was when distribution was taking place, and the public was full of hope and buying regardless of price. After that, a long decline started and Baldwin reacted to 62 3/8 during the week ending June 25,1921 . It was down 93 points from the high of 1919. During the last week of the decline, it went down from 70 to 62 3/8, over seven points, and the total sales for the week were less than 110,000, which showed that liquidation had about run its course and that there was very little stock pressing for sale. The amount of sales at this time in one week were about half of the capital stock and probably about as much as the floating supply, while when the stock was nearly 100 points higher, the capital stock was changing hands about twice each week. stock photograpy ~ day trading |