Tabell’s Market Letter – November 26, 1954

Walston &- Co. MEMBERS NEW 'fORK STOCK EXCHANGE AND OTHER LEADING STOCI( AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO iSw,tdd) OFFICES COAST TO COAST CONNECHC BY DIRECT PRIVATE WIRE SYSTEM TAB Ell'S MARKET LETTER In September of 1948, over six years ago, I issued a market letter that caused a bit of comment. ht that time, the Dow-Jones industrial averages were around 180 and the projections mentioned in the letter ap- peared quite fantastic to most observers. The final paragraphs of the letter follow. The 'fifth, or final advancing phase, will be an upsurge carry- ing into the middle 1950s. This will be the dynamic upswing with over-speculation and heavy public participation. The pattern is not complete as regards the ultimate price ob- – J e-ctivefor' this final- advancing -phase,-butthe-DowJones -.,., – – industrials should sell above the 1929 high of 386. A preli- minary objective, calculated from the long-term base patterns, suggests about 450 in the averages. The objectives of 250 for the present phase, and 450 for the ultimate advance, seem fantastic now, but only because of the present depressed mental state. Percentagewise, the advances are quite in line with the moves of the market over the past 60 years. It must be remembered that this country is still in a long-term upward growth channel. My prediction may eventually turn out to be quite conservative. On Friday, the Dow-Jones industrials sold at an intra-day high of 388.96 and surpassed the 1929 high of 386.10 and reached the first ob- jective of my long term forecast. However, as mentioned in the last paragraph of my 1948 letter, I may have been a bit conservative. I do not believe that the present advance is the final phase. The market has not yet reached the stage of over-speculation and heavy public participation. That stage will occur, if it does occur, at a later date and should carry the industrial average to at least 600. Over the nearer term, the present advance vlill most likely top out in the ,next few months in the 385-425 area. This will be followed by a lengthy consolidation period tor- a year 'or-two with the averages holding in – a broad trading area bounded by, roughly, 385-425 on the upside and 350-330 on the downside. After that another advanCing phase will occur. However, the action of individual issues is much more important than a general market average, particularly over the nearer term. In checking over my letters,I find that I have recommended quite a few issues over the past two years or more. Some of these have been eliminated by subsequent advice to take profits or switch into other situations but, nevertheless, the list is still quite sizeable and it might be wise to review all recommendations made Since early 1952 with the purpose of cutting down the list. Some have not worked out very well and it now appears advisable to SWitch into other situations with more favorable price appreciation potentialities.In most cases, however, the recommendations have followed the anticipated technical patterns and now show substantial profits. Some have already reached their indicated upside objective and may require a lengthy consolidation period before the advance is resumed.In capital appreciation accounts, it might be advisable to switch into other issues that still indicate higher levels. In any event, issues that have reached upside objectives hardly appear worthwhile candidtes for immediate purchase and will be eliminated from the list until a new pattern forms. A complete review of all issues recommended-since early 1952 -and not subsequently-eliminated, start-s below and will be completed in the next letter. ABBOTT LABORATORIES (44) has held in the 40-49 range since mid-1952 .,f \ I and appears to be building up a potential base area. The long term objective is 6o-70,but there is no indication of an immediate move. This good quality issue sold as high as 64 in 1952. 1.dvise retention and purchase for patient holding. ALLEGHANY CORP. (5) was recently recommended at 3 3/4.It is a specula- tive issue and should be bought only in long term capital appreciation accounts willing to exercise considerable patience.However,the long term objective is substantial with an indication of 11 followed by a later 17. Thh memorolndum II not to be construed 1111 offer or lollcitatlon of offln to buy or lei I IiIny s,(untles From time 10 me Whlon & Co. or an pu'n thereof mlly hlille an ,nt,relt ,n some or all of the M,u,ili mentioned h,rn The for,gOlng mlll,ri.' h41 bn-pr,pllred b.Ii UI as lit metier of in',rmll,ion onl, It I! blUed upon inlormolltoon belielted relible but not nec'''.tll, compl,t., is nol qUII'lIn',eel II' ,cur.t. or finel, and 11 not .ntended 10 loreclol. ,ndependenl IncIU''' — ..,.,., it -2- ALLEGHENY LUDLUM STEEL (42) was originally recommended in the 33-28 area. t has just broken out on the upside of the long 26-39 trading area in which it has held since mid-1952. The long term upside objective is 56-63. Would continue to hold and buy on minor price dips.There is now support at 39-37. ALLIED STORES (51) has been on my recommended list for a long time with an original recommendation at 38. The first objective appears to be 55-58 where there is some overhead supply. The longer term indication is above that level, but considerable consolidation may be needed first. A good income holding security with a higher price potential. ALLIS CHALMERS (72) originally entered my list in the 48-45 area. It re- cently reached a high of 74. Immediate objective is not clear, but would continue to hold for long term objective of 90. There is downside support at 67-65 where stock should be bought. AMERICAN -G-HAIN (38-)-has-reached cnewhigh territory ,at-38., The -long term— objective is 55-60. The nearer term objective is 39-43. The stock yields over 6 at present prices. There is downside support at 35-34. Continue to hold and buy on minor weakness. AMERICAN ENCAUSTIC TILING (12) This low-priced issue in the building field originally mentioned around 7. The long term objective is 17-19 so the stock still has a sizeable upside potential over the longer term.Continue to hold and buy on minor declines. AMERICAN NEviS (24) The downside breakout of the long 37-29 trading area was bearish and indicated lower levels. This has possibly been the worst acting issue in our recommended list. If not sold in the downside break- out, would continue to hold as the potential base formed indicates a possible return to the 29-31 level. Would sell 1n that area. AMERICAN POTASH & CHEMICAL (65) was first mentioned in my letter at an equivalent price of 40. (The stock was ex-dividend 10 stock on Friday. The high before the dividend was 73). The stock dividend obscures the immediate pattern but the stock should be held and bought on all minor price declines as the longer term objective is 108-118. AMERICAN RADIATOR & STANDARD SANITARY (23) has had a sharp price rise,but still indicates higher levels particularly over the longer term. The up- side penetration of the eight-year old base at 12-17 indicates 27 followed by –a- long -term40. RecerJ.-t- high was 24.-Hold- andb1iy-on -minor crecl-ines-. AMERICAN SEATING (31) has been in a slow uptrend. Most likely this trend will continue but for long term growth would prefer Hooker Electro-Chemical or Victor Chemical and advise switching into either of these issues. AMERICAN TELEPHONE & TELEGRAPH (175) still yields slightly over 5 and I conSider it an excellent purchase where income and safety of dividend payments is the prime consideration. The intermediate objective was 171- 179 and the longer term objective is 200. AMERICAN VISCOSE (43) has broken out on the upside of the 31-39 base area. The upside potential is 52-57. Would continue to hold,but would be inclined to sell into the above mentioned areaas there is heavy overhead supply at 58 and above. . ARMSTRONG CORK (92) wa originally recommended around the 50 level. The upside potential is 95-100. This area has almost been reached. Other situa- tions appear to offer better profit opportunities and the stock is being dropped from my recommended list. ASSCCIATED DRY GOODS (28) is a recent recommendation. The long term pat- tern is not clear, but the stock has an intermediate term objective of 33-35 BABCOCK & WILCOX (71) has been on my recommended list for a long time Since its original recommendation in the 35-33 area. At present price levels it is qu.ite-close to its -upside ob.jective -of 75-80aml further profitc-poten- tials appear limited. Combustion Engineering (55) offers a better capital appreciation prospect and a switch into that issue is recommended. BALTIMORE & OHIO (32) has an attractive technical pattern. Ability to pene- trate the 1953 high of 30 indicates an upside potential of 43 over the in- termediate term. Would continue to hold and buy on minor price declines. There is support at 30-28. BEAUNIT MILLS (22) has been showing mediocre price action until recently, but the ability to break out of the 14-22 area now indicates 27 followed by 31. Would continue to hold. BELL & HOltJELL (27) is showing improving action. The intermediate term pat- tern suggests 35-37 with an even more favorable potential indicated over the longer term. Hold and buy on minor declines. EDMUND vi. TABELL vlAlSTON & CO.