Tabell’s Market Letter – May 28, 1947

Technical Market Action shown Both Pepsi-Cola and excellent lilarket action. Cities Service, recommended last week, have ;-'( ,/Ii ,/ Pepsi-Cola reached a high of 50 5/6 on Wednesday, up over five/' points from last week's low of 25 1/4. The stock is near the 1947 high of 51 1/2 reached in February. Wednesday's close was 50 1/4. The technical pattern indicates no important upside resistance until the 54 level. Ulti- mate indications pOint much higher. Cities Service also approached its 1947 high of 52 5/8 to reach 51 1/2 on Iednesday. At that price, the stock was six pOints above last week's low of 25 5/8. The technical pattern dpes not indicate Duch resistance until the 36-58 area. ednesday's close was 50 7/8. Would continue to accumulate both Pepsi Cola and Cities Service on soft spots. Another issue with an encouraging technical pattern is Westinghouse Electric. Its early 1946 distribution area indicated a reaction to 21. The October low was 21 liB. Since that tirJe, the stock has built up a.sizeable base pattern between, roughly, 25 and 28. Last week's low was 22 1/2. The base pattern, if penetrated upside, suggests a return to the 40 level. Westinghouse closed at 25 5/B on Wednesday. It is interesting to note that Westinghouse, after adjusting for the 4 for I split in 1945, sold higher than its present price of 25 5/B in every year since 1956 with the exception of 1942 and 1945. The earnings for the first quarter nere released Wednesday and showed 81 cents a share. AdVise purchase of Westinghouse Electric as an undervalued better quality issue. . Technical action of the general market is extremely impressive. The iJarket successively met the test of last week's low on TUesday when liquidation dried up and the oarket rallied to close unchanged. The rally continued on llednesday vrith gains of \n.89 for the industrials and 1.18 for the rails. Since September, the market has declined to the lSS-160'area six tL'Jes and has held each tilne. In the process,. it has built up e. size- able base pattern that would indicate the possibility of a rally to the 197-205 level if the February highs were passed.However, the February highs are quite a distance above the market. A nearer confirmation of the upswing would be indicated at 175. That level is ir.lportant because, if it were reached, it v;ould result in the breaking of not only the dovmtrend line froD the February highs but also the major downtrend line connecting the May 1946 high and the February high. It would also result in the upside penetration of the 200 day lloving average. In such an event, the backbone of the down- trend would be broken. This possibility is quite out of line with the over- whell.lingly popular predictions that the average will aecline to the 145-125 level before the bear lJarket ends. H0\7ever, it is in line with the constantly reiterated opinion of this letter that the 170-160 area is a long term buying range. EDMUND W. TABELL May 28, 1947 Closing Dovi-Jones Industrials Dow-Jones Rails Dow-Jones 65-Stock SHIELDS & COMPANY 168.06 45.64 59.41 T1t. opinionzp,…..d itt this IsHer ate the psrsonaJ interpret.ticn of chem &y Mr. Edmund W. label! and ar. not prelontecl as the opinIons of Shi.ld. & Company. ————————– Mey 28, 1947 / f Despite the ceneral e5imism. tllere is a potentially bullish technical pattem that could possibly .e in the process of form,.tloLl. '.lhe first cOl's'rllcti1(e ; poillt WIJ.S the ability of tile Lo,,-Jones il1uustrial average to meet sUP,;JOl.,t last idoneiay, !.lay 19th, at an intra-day low of 161 036. 'ihis 1017 ,as … fraction above the October 50th 10.. of 160.49.,. The second conseructive pi'l'I; 1s based on yester- ciayls action. J1fter a r'Jlly ,rom the l.lay 19th 10v; of 161.3&, to a high of 167.BC on Iay 21Sra, the avera.;e re-actea to a low f 164.59 yesterday. At this lJoint (au appruJUiaately 50 correctioll of tile six pOinL rally from last Monuay's lows) the. sellir\6 driao. up and the major part of the 0.ayl s tieclines V/Cre regainerl. lVolume inc.lcc,tio'ls v;al';' also ,avorable. 'Ille thirci falt-orable point woula be the ability of tl,e lndstrial average to penetrate the ,i,ay 2Brd high of 167068. If this llapened, the milor tread ,ouiCt be indicated as p. The fourth. favorable incllcatioll'VlOuld be the ability of the indt,strial avera6e to 1.J.ly above 175. In sUlh tl.ll event, not oilly the aowntrenu line from t.he February lOth high of 164.96 trou!;,il tbe sucee;)lvely lower highs of 162.48 on 1.larch th, 179.68 oa ;.larch ;obth a'\o 1'15,,06 on Jjlay 5th would ue penetrated, but also the downtrend line from the ,,,ay 8th, 19',8 hilstl of 215.56 throu;h the .Febr 10th h11';\h of 184.)16 vTOuld 0.1&0 ,be penetrateu. 'In st,ch a;, event, t.he baekbone of the dOllll- trend I,oulci be aroksn. If that happened, the f.lfth favorable indication \ ou1d be a pen&traticm of tele Februa.cy hig), oj 164.96. In that event, the base paUecrn built u!) from Septembc.r 1946 to Mail 1947 \7Crld indicate a 11Ot81ltlel rally to 19'1-205. Aomittedly, this projeetion presupposes five possibilities l.!1C oaly t'1l0 of tA.s live huve actually come to pass. HO;1ever. from a study of the tednichl patten, I con.;icier it u much oette!' pr-obabilit;y' than the OVE1'Nhclm.i.llgly popular prediction tlw.t the averc..,es will (ecline to the 145125 area before the beul' mal'iwt encis. -'l'abell- – !-. ———— ——– ————