How To Break Into A Day Trade (part 1)

We have all heard people boast that their purchase was at the top eighth and that it had the effect of turning the day trade down. Those who make their purchases after this fashion are quickest to become scared at the first sign of weakness, and throw overboard what they have bought. First greed and then fear controlled them.

In choosing reading, therefore, the tape reader is picking out the day trade stock in which he is likely to have the most help on the bear side. At 12.30 PM the day trade market is standing still, the majority of transactions being in small lots and then only fractional changes.

Reading shows the effect of the recent unloading. It is coming out 500 at 143 3/4, 500 at 143 5/8, 400 at 143 ½ and 400 at 143 3/4. The operator realizes that Reading is probably a short sale right here, with a day trade stop order at 144 1/2 or 5/8, on the ground that the bulls must have an extraordinary amount of buying power to push the day trade above its former top, where, at every eighth advance over 144 3/8, they will encounter a considerable portion of 50,000 shares. This reasoning, however, is all aside from our main argument, which is to show how to get out of the stock, which will be given by the action of day trade stocks other than that in which the trader is working.

Union Pacific shows on the tape in small lots at 182 3/4; New York Central 1100 at l30, and 900 at 130 3/8. The rest of the day trade market seems to have all the snap and ginger taken out of it and the operator does not like his position on the long side.

There is no definite indication to sell short, however, he feels that his chances on the long side have been reduced to practically nothing by the weak undertone of the day trade market, he therefore gets out of his Union Pacific and waits until the tape tells him to sell Reading short. Union Pacific weakens to182 5/8. The others slide off fractionally. The weakness is not strong enough to forecast any big break, so he continues to wait. There are 1800 shares of Union altogether at 182 5/8, followed by 3000 at 182 1/2. Other day trade stocks respond and the market looks more bearish.

Consolidated Gas trades 163¾ - 163 ¼ - 163. This is the first sign of activity in the day trade, but the move is nothing unusual for Gas, as its fluctuations are generally wide and erratic. The balance of the list rallies a fraction. Gas trades 162 ½ to ¾, then 500 at 162 1/4. At this point Gas, which has been very dull up to now, forces itself, by its decline and weakness, upon the notice of the operator.