Page 137 - THE MARKET WHISPERER

THE MARKET WHISPERER 13 5

disappointed. They are losing money, and sorry that they were tempted and

bought at a high price. They do not want to sell at a loss, so they promise
themselves that if the stock returns to the price at which they bought [1],
they will correct their mistake and get rid of the stocks at the same price

they bought them.

They are not the only disappointed buyers who bought; there are many

others who are also waiting to sell at their entry price. If the stock does go
back to that first high [2], it will encounter all those waiting sellers.

Can the stock price overcome the sellers’ resistance and rise to a new
high? Sometimes yes, sometimes, no. The question revolves around the

balance of forces between sellers and buyers. In the chart above, we can
see that the stock continued rising [3]. In other words, in this case the
buyers won.

The retreat from the second high [2] is called “double top.” When a
stock rises to the double top, in most cases it will retreat due to resistance,

and drop. In such situations, if you bought a stock that is about to reach its

double top, it would be wise to realize some of the profits a little before the

anticipated resistance point.

SMART When a stock drops from its high and tries to get back up,
MONEY it encounters the resistance created by all the disappointed
buyers who bought as it rose previously and now wish to sell
at their purchase price.

Low – Turning into Support