Please help explain this statement from a book (Accumulation)

[babymush]

Once most of the stock has been removed from the hands of other traders (ordinary private individuals), there will be little or no stock left to sell into a mark up in price (WHICH WOULD NORMALLY CAUSE PRICE TO DROP)
At this point of critical mass, the resistance to higher prices has been removed from the market.

Why would this normally cause the price to drop? Do not quite understand that portion.

Thank you

 

[Trader333]

In my view this will all depend upon the intentions of those who have now accumulated most of the stock.


Paul

 

[Roberto]

Why would this normally cause the price to drop? Do not quite understand that portion.

My reading of it is like this: prices go down as a result of a preponderance of selling pressure over buying pressure. If there's not much more for sale for whatever reason (e.g. see Paul's comment above) that can't happen. Some people look at it as "supply and demand". If supply is increased, prices can easily come down, can't they?

 

[robq]

Perhaps there are people who bought at higher levels, who regret that they did not sell earlier and who are waiting for a chance to exit at a profit or small loss if there is a rise in price. If there are such people, and they sell after the price is marked up the price will fall back showing that resistance to higher prices has not been removed.

 

[Mr. Charts]

"there will be little or no stock left to sell into a mark up in price (WHICH WOULD NORMALLY CAUSE PRICE TO DROP)"
I suspect the confusion is one created by syntax.
"there will be little or no stock left to sell (WHICH WOULD NORMALLY CAUSE PRICE TO DROP)
into a mark up in price" - should now sound rather more logical
Richard

 

[SOCRATES]

Muddled Explanation

Once most of the stock has been removed from the hands of other traders (ordinary private individuals), there will be little or no stock left to sell into a mark up in price (WHICH WOULD NORMALLY CAUSE PRICE TO DROP)
At this point of critical mass, the resistance to higher prices has been removed from the market.

Why would this normally cause the price to drop? Do not quite understand that portion.

Thank you

I have decided to put you all out of your misery, otherwise this will go on and on I can see, because it appears the above is explained in PoD G Logic, and therefore very confusing.

What is meant is as follows:

Once most of the stock has been removed from the hands of other traders, including ordinary private individuals, there ought to be little or no stock left to sell into a mark-up in price by these other traders, including ordinary private individuals. At htis point of critical mass, the resistance to higher prices has been removed from the market.


If this were not the case, and only a small proportion of the stock were removed form the hands of other traders, including ordinary private individuals, then this balance of stock still in the hands of other traders, including ordinary private individuals, when offered for sale by them, would cause prices to be temporarily dropped in order to absorb this unexpected supply. Supply of this type and under these conditions is what causes prices to be made to drop.

 

[Porks]

Its helps me to look at accumulation as an operation.

The aim being to transfer stock from weak holders (us) to strong holders (running the operation). This is done as quietly as possibly, typically in a calm and boring base.

Once the floating supply has been removed (and this is usually tested first with a small spike down in price to look for volume, if there's none, then this confirms little supply is available), then the markup phase can begin with little resistance (selling) to stop it.

If the floating supply wasn't removed, then the cost of raising prices and having to absorb stock at these higher prices would be too much, and the operation would likely fail.

Thats the theory but how does it help with trading ?

If you see a nice calm base, and wonder if its accumulation, wait for a low volume test, a good signal that higher prices would be expected soon.

Porks

 

[SOCRATES]

A nice calm base, as you call it, is not always accumulation, it can be a member of different families of mischief at work.

 

[Porks]

Agree,

Not all bases are accumulation.

Do you mind elaborating on 'different families' in plain langauge ?

Or you still in your guru phase ?

Porks

 

[SOCRATES]

See your private message inbox tonight after hours.

 

[TheBramble]

I've never understood why some feel the need to announce publicly they've PMd someone privately...

 

[Roberto]

I've never understood why some feel the need to announce publicly they've PMd someone privately...

Privately is the normal way to PM someone, Tony. I've sent you a more detailed explanation by carrier-pigeon.

 

[TheBramble]

There's only a couple of them do it Roberto. Strange.

 

[Roberto]

Strange.

But more reliable than smoke signals, you know?

 

[Porks]

As promised Socrates PM'd me today and offered good info relating to accumulation.

I suggested he make this public but he declined.

Each to his own, but why post at all then ?


Porks.

 

[bracke]

As promised Socrates PM'd me today and offered good info relating to accumulation.

I suggested he make this public but he declined.

Each to his own, but why post at all then ?


Porks.

Perhaps because of the flak he received when posting on the 'basement' thread?

Regards

bracke

 

[TheBramble]

Each to his own, but why post at all then ?

As you say, each to their own.

But Bertie needs some mechanism to 'accumulate' (or trawl) the huddled masses for his PM network somehow.

Dipping in and out of random threads letting all us know what we're missing is his way of 'punishing' the many for the transgressions of the few.

If he was worth his salt, he could fashion a PP (posting persona) to ignore the idiots like me and post to the grateful crowds.

 

[Porks]

I think most of the flak was directed toward the tone of his posts and replies.

After all, others contribute without receiving such bad press.

Socrates knows what he's doing, I hope its just a bit of fun and amusement and not as some have suggested to earn tuition fees once the selected pupil is 'ready'.



Porks

 

[SOCRATES]

I think most of the flak was directed toward the tone of his posts and replies.

After all, others contribute without receiving such bad press.

Socrates knows what he's doing, I hope its just a bit of fun and amusement and not as some have suggested to earn tuition fees once the selected pupil is 'ready'.



Porks

How kind and considerate of you to think of my welfare. Thank you very much.

 

[Porks]

No need to thank me Socrates,

I wasn't refering to anyone's welfare,

However, I have been thinking that you and others talk with such authority that whether or not you're very good traders, many believe you to be.

But wouldn't it be fun to have a trading competition, maybe the highly experienced, knowledgable traders (like yourself) against the relative newcomers (like me).

Yes, I know you have nothing to prove, yada, yada, but at least you'd have the chance to put upstarts like me in their place ?


Porks.