How To Break Into A Daytrade (part 2)

He begins to look upon the daytrade as the possible shears which will cut the thread of the market and let everything down. 12.45 PM Gas trades 500 at 161 1/2. It is very weak. The balance of the list is steady, Union Pacific 182 5/8, Central 130 3/8, Reading 143 3/4. There is a fractional rally - Union Pacific to 182 7/8 and Gas to 162. Plenty of Central for sale around 130; Reading is 143 1/2.

The rally peters out gradual weakening all around, but the tape reader cannot go with the trend until he is sure of a big move. Central trades at 129¾, showing that after all the daytrade buyers at 130 are filled up considerable stock is still for sale. The others show only in small lots. The daytrade market is on the verge of a decline; it is where a jar of any sort will start it down. Union Pacific is heavy at 182 1/2 - trades 300 at 182 3/8, 200 at 1/2; Reading 143 1/2, 3/8, and 1000 shares at 1/2; Central trades 2000 at 130 and 800 at 1/8.

Here is the thrust he has been looking for! Gas 163¾ on 200, ½ on 400, 161 on 300, 160 on 400! He waits no longer and gives an order to sell Reading short at the daytrade market. They are all on the run now, Reading 143 1/2, 600 at ¼, 1300 at 1/4. Central 130, 129 1/2, Gas trades 500 at 159 1/2. Something very rotten about Gas and it's a cinch to sell it short if you don't mind trading in a buzz-saw daytrade stock.

The daytrade market breaks so rapidly that he does not get over 142 ¾ for his Reading, but he is short not far from the top of what looks like a wide open break. Everything is slumping now - Steel, Smelters, Southern Pacific, St. Paul. Union Pacific is down to 181 5/8 and the rest in proportion. Gas 158 1/2,158 on 300, 157, 156, 155, 154, 153 and the rest "come tumbling after." Reading 141 3/8, 500 at ¼, 400 at 141, 140 3/4, 500 at 1/2, 200 at 140, 600 at 139 3/4, 500 at 5/8. Union 181 - 180 7/8, 3/4, 1/2, 1/4, 600 at 1/8, 500 at 180, 179 3/4, 500 at 1/2, 300 at 1/4, Central 127 1/2.

The above illustrates some of the workings of a tape reader's mind; also how a break in a daytrade, entirely foreign to that which is being traded in, will furnish an indication to get out and go short of one daytrade or another.

The indication to close a daytrade may come from the general market where the trend is clearly developed throughout the list all stocks working in complete harmony. One of the best indications in this line is the strength or weakness on rallies and reactions.

Of course the break in Gas, which finally touched 138, was due to the Supreme Court decision, announced on the news tickers at 1:10 PM, but, as is usually the case, the tape told the news many minutes before anything else. This is one of the advantages of getting your news from the first place where it is reflected. Other people who wait for such information to sift through telephone wires and reach them by the roundabout way of news tickers or word of mouth, are working under a tremendous handicap to daytrade with.

That not even the insiders knew what the decision was to be – is shown in the dullness of the daytrade stock all morning. Those who heard the decision in the Supreme Court chamber doubtless went straight to the telephone and sold the stock short. Their sales showed on the tape before the news arrived in New York. Tape readers were, therefore, first to be notified. They were short before the Street knew what had happened.