How to Tell a Good Tape From a Bad One

Beginning last Thursday, Hewlett-Packard was a tell.
Author:
Publish date:

How can you tell a good tape from a bad one? How can you find out whether the selling is motivated and real or half-hearted and more program-driven?

I like to look at individual stocks for answers. Take

Hewlett-Packard

(HWP)

. On Thursday this stock was incredibly heavy. Given the nine-point jaunt the stock had experienced, it was certainly due for a rest. It got hit for a couple.

Friday, a tough day for tech in general, hardly fazed Hewlett-Packard. The stock hung in fairly well on huge volume. It looked like it had found a new level and was basing for an assault at par.

After the close the company announced a $2 billion buyback and I, a shareholder, couldn't wait to come to work Monday to see how much strength HWP would have off this announcement.

Very little, it turns out.

On Monday, HWP simply collapsed. Those who bought down $1, such as I, got their butts whacked. The stock is still heading lower as I write this.

Here you have an important tell. Despite good news on top of what looked like to be a sold-out seller, HWP was still able to rally. That was a signal that things have to work lower before they can go higher. And that's just what is happening.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long HWP. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

letters@thestreet.com.