wpe50.jpg (1913 bytes)     TigerSoft News Service    9/11/2008      www.tigersoft.com     More information later today.

         Bullish High Volume Reversal Days.
              Bearish High Volume Break-Away Days. 

                           Bank of America versus
         Washington Mutual and Lehman Brothers

by William Schmidt, Ph.D.  
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   Bullish High Volume Reversal Days           

by William Schmidt, Ph.D.                                             

           On volume that was 360% its average trading volume for the last 50 trading,
    days, the silver stock SSRI actually rose a little today and closed at its highs.  This
    is probably a valid high volume reversal day.  Such very high volume after a
    long decline is often a sign of a selling climax.  Everyone - that can be scared
    out of the stock for time being - sells. The stock exhausts its sellers and
    a rally usually starts.  I take it as a bullish 2-day high volume reversal day when
    the second high volume day is up.  TigerSoft flags these days.   One scheme
    compares a given day's volume with volume over the last three months.   Another
    measures how much volume it takes to move prices.  When there is little additional
    change in price after a substantial decline below earlier support but volume is very
    high, it is often an important sign of support.

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           This is often very significant for traders.  It's considered high volume
    churning if the stock goes sidewise on continued high volume.   After a very big
    decline such high volume without further weakness means that someone has
    a bushel basket under the stock and is buying all the stock offered by those
    that are panicking or selling to meet margin calls.  Once the panic ends, it's
    easy for the stock to recover.  Exactly the same situation technically occurred
    with Bank of America. The stock rose more than 50% in the following six weeks. 
    You can use this idea.  It is reliable.

            Books have been written about "high volume reversal days". But the concept
    is not infallible.  And it is not usually a sign of a final low, though it can be.  Traders
    should appreciate that a good rally usually follows.

            Now compare three charts: SSRI, BAC and WM, 

                    In the SSRI chart above, volume is shown as a histogram
            beneath prices.   Volume is red on down-days and blue on up-days
            in our charts.   The mid-March spike in volume was only for a single
            day and there had not been a substantial decline before that.
            That high volume day was actually a break-down day.  And it took
            place at the round number 30 where a lot of public buyers probably
            bought at what they took to be an advantageous price.  But it was not,
            because the high volume occurred on a day when a price range
            was exceeded. To be a much more reliable high volume reversal
            day there should have been a substantial decline from the point of
            breakdown.  That is what we have probably just seen.  But prices
            will need to turn up now and not resume their decline.

                  The best book on the subject was done more than 40 years ago.
            Edwards and Magee - Technical Analysis of Stock Trends.  They
            suggest that traders should wait and buy if the reversal continues
            the next day.   They said to buy on stop 1/8 above the closing
           price of the high volume reversal.  Here that would be a Buy at
           16.31.   They would also advise using a close sell stop below the low
           point of the decline to keep any losses quite limited.   So, this will
           interesting to watch.   Right now silver is down 20 cents.  A reversal
           upwards past 16.31 would be bullish tomorrow.

                  The market is on thin ice because of talk that Washington
            Mutual may fail in a matter of days, meaning the FDIC will take it over
            unless they can get a big cash infusion or they find someone to buy
            it out.  I have been predicting this since last December. (See story. )

                  Making predictions is hazardous, of course.  But it is necessary
            in the stock market.   It is a way to learn and it is also a way to learn
            to be humble

           High Volume at Bottom - Insider Buying -
                         The Case of Bank of America

                        Bank of America (BAC) broke below is support-line at 36.
             On higher and higher down volume it fell, until it reached  20. 
             At that point, the day's (red) volume was mor ethan twice what
             it had been on average for the last 50 trading days. On very
             high volume, it suddenly reversed and rose to a point above 33.
             Insiders knew that a turn was coming.  Bank of America was drafting
             what became the new Housing Bill that Congress passed and the
             President signed.   ( See story. )

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               When looking for high volume reversal days, it is important not to
         confuse the high volume occurring when a price range breaks down
         with high volume AFTER a long decline.   The latter is bullish for
         trading purposes.  The former is bearish.  Our Tiger charts turn the
         price bar red on a high volume day.   Price breakouts or breakdowns
         that occur with a red price bar are more apt to continue in the direction
         of the breakout or breakdown.

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                                  Washinton Mutual - The Black Hole of Banking

                This is also important.  We use our unique internal strength indicators,
            the TigerSoft Accumulation Index and TigerSoft's Closing Power to see
            when to sell short before the decline and to get a sense of the magnitude
            of the impending decline.  Washington Mutual looked as bearish as a
            stock could look, back in December.  See the write-ups TigerSoft has done
            on it. 

               Here is how Washington Mutual in December 2007.  It's extreme
            bearishness was judged correctly then by:

                      1)   the amount of red Distribution shown by the Accumulation Index
                and the way in which it was steadily and deeply (red) negative.
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                2) the way the OBV Line (representing aggressive selling) was
                making new lows ahead of price.
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                    3) is red-down day volume higher than blue-up-day volume.
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                    4) the way the stocks' ITRS (Intermediate-Term Relative Strength
                 indicator stayed in negative territory. 
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                  5) how Closing Power kept declining, despite the rising Opening
                 Power. The rising Opening Power showed that it was the broader public
                 that was wrongly buying all the way down, while professionals were
                 selling towards the close.  At the end of this chart, the Closing
                 Power was about to surpass its downtrend line.  A rally to 21 followed.
                 This probably owed to a lifting of the pressures from year-end tax selling.
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                                       More examples will be set out here.

                                The Black Hole of Lehman Brothers (LEH)

   LEH:   Automatic Signals, Prices, OBV, Accum. Index, ITRS (Relative Strength)

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LEH:  Volume and Closing Power
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