What is Stem The Tide
Breaking Down Stem The Tide
Stemming the tide does not constitute stopping the unfavorable development entirely or immediately, but rather it implies a lessening or gradually reduction of the negative trend, with the goal of containing it and eventually eliminating it at sometime in the future. Stemming the tide in an investing context is used as a metaphor for reversing a long-term market trend. The tide would refer to trends in the market that have long-term effects, rather than short-term changes that may reverse in a short period. Issues such as inflation, high unemployment and/or high interest rates, would affect an economy’s tide. In the context of an individual stock, stemming the tide often refers to attempts to halt the free fall in a share’s price with the long-term goal of changing its direction.
Using ocean metaphors for market trends was coined by one of the market’s first technical analysts, Robert Rhea. Rhea was a proponent of Dow Theory, a form of technical analysis that he would use to call market tops and bottoms, and then profit from those calls. Tides are often referred to in the context of triple screen trading. Using this system, a trader uses a longer-term chart, or market tide, as the basis for trading decisions. For instance, if a trader plans to trade daily he or she would examine the weekly moving average convergence divergence (MACD) histogram, as its slope provides indication of the market tide.
Examples of Stem the Tide
Stem the tide is usually invoked to reverse a negative trend and prevent it from getting worse. These trends can include an increasing crime rate, negative public opinion about a company, the loss of qualified workers from a given geographical area, negative demographic trends and causes of environmental pollution, among many others. One issue of current interest to businesses would be to stem the tide of rising health care costs for employees. Many cities in the U.S. are currently grappling with stemming the tide of departing qualified and skilled workers who are leaving for other more attractive areas. Another context where experts would like to stem the tide is in the decline of small business in the U.S. in the years following the Great Recession. At a smaller scale, a company might need to stem the tide of profit loss due to inventory shrinkage, talent loss or being outmaneuvered by a competitor.