Commodity trading systems – If this were the twentieth day that stocks had held to these levels after a steady and heartening rise”and if there were nothing in the political or business news indicating that new contracts for missiles or military aircraft were being let”the investor who’d bought General Dynamics at 32 might figure the market had reached a temporary peak and, with his stock near its high, decide to sell and take his 15-point profit.

On the other hand, with General Motors hovering near its low”and in the absence of news that corporate taxes were going up or that auto men expected a poor year”an investor might decide that the stock was lagging a bit behind the market, while returning a fair 4.1 per cent, and buy. By the same token, if this day were the twentieth at these levels after a drop, the General Dynamics man could still decide to take his 15 points and run (“since the market hasn’t rallied after three weeks, it might go still lower and cut my profit”). Or, he might figure that the drop had done him no damage”that his stock was still within reach of its high”and sit tight, waiting for an upswing and perhaps an increase in his gain. The General Motors man, on the other hand, might figure that a little more downward pressure, say, four more points, would give him a premier stock with a 4.5 per cent yield.

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[tags]Commodity Trading Book[/tags]