
Tabell’s Market Letter – April 18, 1957
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If ,,1' . ,, NEW YORK Walston &Co. – – – – – – – – – I n c . – – Membe,.s New Yo,.k Stock Exchange PHILADELPHIA' LOS ANGELES SAN FRANCISCO BASLE (Swlhedd) OFFices COAST TO COAST CONNECTED BY DIRECT PR1VATE WIRE SYSTEM TABELL'S MARKET LEnER April 18,1957 The market continues to inch forward and has reached new high terri tory since the February low. The advance has been orderly and there are, as yet, no signs. of technical deterioration. My intermediate term techni- cal gauge, which signalled a buy on February 13th, has not yet entered over- bought territory and volume indications remain favorable. Individual iSSUES will dominate upside price action, but the overall pattern still indicates somewhat higher price levels over the near term. of the most common questions which is asked of the market a1llirup.s as follows XYZ- is down from 85 to 37 in the past Do-youthiiiR–the stoc\iS-rea-dy'to bUYyetY–Such aquestionis a–; fairly natural one. After any stock has declined sharply in price, the normal tendency on the part of the public is to feel that it must be a bar- gain. Unfortunately,,,such is seldom the case. As Harold XQSchreder has often pointed out, much confused thinking concerning securities results from the fact that they are considered in terms only of level. Few people that a stock is a moving object and, as such, has two other qualities in addition to level — namely direction and momentum. The airplane, also a moving object, is often used for purposes of comparison. Two airplanes, one in a steep climb and one in a power dive may, at a given instant, be at the same level. It appears obvious that one would feel much safer in the former than the latter. The airplane comparison may be carried a step further. An airplane that has just landed must spend a good deal of time taxiing along a runway, refueling, and then taxiing back for a takeoff. A stock alsc, after a sharp decline,will almost invariably spend a long time in a sidewise trading area backing and filling before any major advance takes place. For this precise reason it is practically never wise to purchase stock immediately after a sharp price decline. In fact, in most cases, thfs practice leaves the investor vulnerable to serious losses…;) This . can ,be history. .- – ,In the year 1955, forty-two issues listed on tne New York Stock Ex- change declined 20 or more, from December close to December close. How – ..did bargain hunters fare in these issues Of the forty-two stocks. thirty- three declined further in 1956 with the declines ranging up to 4e. Ten of the forty-two declined 30 or more in 1950, and only one showed a profit of more than 30. The average decline was over 13. These figures pretty'well that it is rather senseless to consider stocks for purchase simply because they have had a sharp de- cline. It is almost equally senseless to worry about stocks which have had a sharp rise if technical and fundamental work proves that the stocks are suitable for purchase. Indeed, strange as it may seem, a stock is often a better buy while it is making new highs, or after it has moven up sharply after a long period of sidewise movement. This fact can also be proved statistically. There were forty stocks which constituted a market elite in 1956 by advancing 50 Had these stocks been down sharply in 1955 Not at all. Thirty-four out of the forty had also advanced in 1955 by amounts ranging up to 70. Indeed, not one of the forty issues had posted more than a 14 decline prior to the year in which they advanced 50 or more. – Thus, in a sidewise market like the present market,1 it is almost always to .buy.a stock–whichis at or- cl-ose 'new- – highs than it is to buy one at the bottom of a decline before it has formed a base. This is due to those elusive qualities, direction and momentum, which are all too seldom considered in making capital appreciation de- cisions EDMUND W. TABELL vfALSTON & CO. INC. AWTamb \\ \ \