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View Full Version : Clear Institutional Traces - December 6, 2011



Billy
12-06-2011, 05:39 AM
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“Big institutions achieve outsized returns by riding strong trends for the long-term (long enough to make a difference). This is the only way for them. They can’t easily and often get in and out due to their size. Establishing small positions does not make sense for them as it would not make a difference for the bottom line. Big winners can make a difference when they are big positions. Big positions take time to accumulate and along the way institutions leave clear traces.” Ivan Hoff

Just looking at the RT 20DMF below, one can see the clear traces of large players pursuing their accumulation program of long term positions. First, the early weakness after the gap up opening was bought. Later on, the selloff caused by new “End of Europe and then of the World” news was aggressively bought and in a hurry!

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The 20 DMF closed at the high of the day and IWM closed at the intraday’s VWAP. For long term trading plans of institutions, it is all about accumulating as much as possible on every dip below VWAP. They ignore the noise and news once their plan is launched. Is the market overbought and extended? They don’t care, they must follow their plan and buy the day’s quota of their desired huge total positions ASAP because they have conviction in higher prices to come and they have discipline in trading their plan. Is the market facing resistance of the 200-day moving average? Well, they better buy all they can before it breaks: later might be too late!

The IWM robot’s position makes good steady progress along the way without any drawdown and the trailing stop could be raised again to 70.84.

The settings for a new position are still neutral but I want to draw the attention of discretionary traders to another risk-reward edge stemming from stage analysis. The percentage of stocks in accumulation and mark-up stages has crossed back above its 5-day moving average from below 30%.

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Since the start of the Alphascanner website last year, we have had 4 other occurrences of this signal. In the table below, you can see the dates and returns for IWM, SPY and QQQ when buying at the closing price of the signal (yesterday’s close in the current case) and selling at the closing price when the indicator crossed back below the 5 dma.

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The average return for IWM was +4.76% and there never was any significant drawdown. The second trade finished flat, but initially saw two weeks of rising prices before retracing it all. All major drawdowns were intraday and were reversed each time at every close. So, buying the dips or at yesterday’s close limit does offer a good discretionary reward-risk from stages structure and dynamics. For some reason, the edge seems to be even much stronger with QQQ and it is probably a good diversification idea away from IWM. Please note that 4 events are not statistically significant and you must use a sound risk management discipline in conformity with your trading style comfort zone.
Billy

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Wei
12-06-2011, 02:26 PM
Hi Bill,

Could you be so kind to give us an update once the stage chart crosses below its 5dma? Much appreciated. I guess the chart is only available to subscribers.

Billy
12-06-2011, 02:47 PM
Hi Bill,

Could you be so kind to give us an update once the stage chart crosses below its 5dma? Much appreciated. I guess the chart is only available to subscribers.

Sure Wei.
I took a huge position today in TNA around daily S1 at an average price of 45.66 with the strong intention to hold for the "long run", based on the stages setup and risk-reward. This is purely discretionary and not robot-related. But a neutral robot signal is not a sell signal if I may repeat the message.
I will of course monitor daily the percentage chart and a potential "death" cross. I will post follow-ups and the final crossing.
Billy

jdg5189
12-06-2011, 03:22 PM
Sure Wei.
I took a huge position today in TNA around daily S1 at an average price of 45.66 with the strong intention to hold for the "long run", based on the stages setup and risk-reward. This is purely discretionary and not robot-related. But a neutral robot signal is not a sell signal if I may repeat the message.
I will of course monitor daily the percentage chart and a potential "death" cross. I will post follow-ups and the final crossing.
Billy

I know you are busy....thanks for your time and efforts!