The Use Of Stockmarket Charts As Guides & Indicators (part 2)

The difference between the stockmarket charts player and the tape reader is therefore about as wide as between day and night. But there are ways in which the tape reader may utilize charts as guides and indicators and for the purpose of reinforcing his memory. The figure stockmarket charts are some of the best mechanical means of detecting accumulation and distribution. It is also valuable in showing the main points of resistance on the big swings.

The figure stockmarket charts cannot be made from the open, high, low and last prices, such as are printed in the average newspaper. We produced figure stockmarket charts of Amalgamated Copper showing movements during the 1903 panic and up to the following March (1904): Price/Time Chart It makes an interesting study. The stock sold early in the year at 75 5/8 and the low point reached during the above period was 33 5/8.

The movements prior to those recorded here show a series of downward steps, but when 36 is reached, the formation changes, and the supporting points are raised. A seven-point rally, a reaction to almost the low figure, and another sixteen-point rally follow.

On this rally the lines 48-49 gradually form the axis and long rows of these figures seem to indicate that plenty of stock is for sale at this level. In case we are not sure as to whether this is further accumulation or distribution we wait until the price shows signs of breaking out of this narrow range. After the second run up to 51 the gradually lowering tops warn us that pressure is resumed. We therefore look for lower prices.

The downward steps continue until 35 is touched, where a 36-7 line begins to form. There is a dip to 33 5/8, which gives us the full figure 34, after which the bottoms are higher and lines commence forming at 38-9. Here are all the earmarks of manipulative depression and accumulation - the stock is not allowed to rally over 39 until liquidation is complete. Then the gradually raised bottoms notify us in advance that the stock is about to push through to higher levels. If the figure stockmarket charts were an infallible guide no one would have to learn anything more than its correct interpretation in order to make big money.

Our writer says, "after a thorough trial of the stockmarket charts on U. P. I find that I could have made a very considerable sum if I had followed the indications shown". But he would not have followed the indications shown. He is fooling himself. It is easy to look over the stockmarket charts afterwards and see where he could have made correct plays, but I venture to say he never tested the plan under proper conditions.

Let anyone, who thinks he can make money following the figure stockmarket charts or any other kind of stockmarket charts have a friend prepare it, keeping secret the name of the stock and the period covered. Then put down on paper a positive set of rules which are to be strictly adhered to, so that there can be no guesswork. Each situation will then call for a certain play and no deviation is to be allowed. Cover up with a sheet of paper all but the beginning of the stockmarket charts, gradually sliding the paper to the right as you progress. Record each order and execution just as if actually trading.

Put my name down as covering the opposite side of every trade and when done send me a check for what you have lost. I have yet to meet the man who has made money trading on any kind of stockmarket charts over an extended period.

The figure stockmarket charts can be used in other ways. Some people construct figure stockmarket charts showing each fractional change instead of full points. The idea may also be used in connection with the Dow Jones average prices. But for the practical tape reader the full figure chart first described is about the only one we can recommend.

Its value to the tape reader lies chiefly in its warnings of important moves thus putting him on the watch for the moment when either process is completed and the marking up or down begins.

The stockmarket charts give the direction of coming moves; the tape says "when." “Any kind of stockmarket charts will show some profits at times, but the test is: How much money will it make during a year's operations?”