The Psychology of Speculation by Henry Howard Harper

It is admitted by the most sagacious financiers that the only sure / way of making money trading in the stock market is to get in and out / at opportune times, and to stay out most of the time. As against this / there are numerous ways of losing money. Among these, one method in / particular is quite popular among a class of traders who although too / clever and conservative to buy stocks at "top" prices, have not the / patience to wait for "bottom" prices. When values begin to crumble / after the top has been reached in a bull market there must be a set / of "carriers," or supports, onto which stocks can be dumped on the / way down. The market does not collapse like a ten-story card house; / it generally goes down gradually for a while, one or two flights at a / time, and finds steadying props every now and then which sustain it / for brief periods. For instance, a certain stock paying $5 a share / annually has been hoisted by degrees from $75 up to $150 a share. / When it descends to $140 a few wise traders who have been impatiently / waiting for a reaction will buy it because it looks cheap at $140 / after having sold at $150; then at $130 another lot of traders who are / a little wiser and more patient than the first lot buy it because it / looks much cheaper than it did even at $140; and so on down it finds / these temporary supports, until at length it gets back to $75, or / perhaps lower, where it is accumulated by a few shrewd investors and / bargain hunters whose attention has been attracted to the market by / front page newspaper headlines announcing that the stock market is in a / state of complete prostration.

They go on about their business and pay / no particular attention to the market until the price has recovered / to a point where the stock, returning $5 a share, is no longer "paying / its board," when they sell out at a good profit, and _stay_ out while / the speculators carry it on up as far as they like. When the stock was / at the bottom price those who bought it on a scale from $140 down were / either so overloaded or pessimistic -- probably both -- that they were / unable to buy more and thus reduce their average to a reasonable cost.