"It is difficult to over-emphasize the importance of studying the technical position, particularly when making a speculative commitment. Many people may say: what is a weak or a strong technical position?""My reply is, in brief, that a stock is
in a weak technical position on the bull side when it has been purchased and is held by a large number of outside speculators; when most of these are looking for a profit; when the price of the stock has advanced to a point where no further buying can be stimulated for the time being."
It stands to reason that when buying power is exhausted a stock must decline, no matter how strong its finances, management or earning power.
"On the other hand, a stock is in a weak technical position on the short side when the bears have exhausted their ammunition by selling all they can afford and when the buying power of investment and speculative purchasers is such that it resists the pressure
of the bears; in other words, when demand overcomes supply."
"The weakness in such a position is found in the fact that all those who are short are potential bulls; they must, sooner or later, cover their commitments in order to close their trades. They do not wish to remain short indefinitely."
"Bears, after they have sold short are an element of strength, not of weakness!"
