Rule #1 Finance Blog

With Investor Phil Town

DEFINING “SIDEWAYS PRICE”

Phil_town_105 Reader Eric Primm wrote in yesterday to ask:

"My question relates Phil Town's post about JOSB .  You talk about sideways and two reds.  What qualifies as sideways?  Could you, please, expand upon what you mean by sideways?"

Answer:

Ahhh.  The sideways price.  That means the price is not going over its previous day's price for several days in succession.  And that can also include a price that is dropping on a day by day basis.

Basically what's going on when the price is not moving upwards is that the big investment buyers are unwilling to go over that price.   And at the same time, every time the price starts to go up, some eager beaver big guy seller is dumping some of his stock.

Remember that tons of trades are done with computer programs, and that a
big investor needs to execute 20,000 trades to buy up or sell off everything
he wants to buy or sell.  All that trading has limits.  And when the
limits are met, the price, goes nowhere.

By itself it
doesn't mean that the price is going to go down tomorrow.  But when you
add in the change in MACD (red) and STOCHASTIC (red), that sideways
price looks downright ominous for the short term.  So "see ya".

But let me warn you about this way of using the investing tools, if you didn't
find out already.  Things can change really quickly, and you will
sometimes find yourself having to jump back in.  So there is art
involved here, and that's why I want you to play with this stuff as much
as you can before using real money… So you don't miss out on gains
and you don't get caught frozen in the headlights while your wonderful
business that is supposed to be on sale drops another fifty percent of
its price!

Now go play. Phil Town