Importance of divergence between LEV and SEV ?!?

[pdp-brugge]

I’m still trying to understand all the different concepts of EV and the interpretation of the high amount of data in the different excel reports and graphs.

If I am correct then an important signal is given when the large players start selling (LEV is dropping and goes below 0) and the small players keep buying (SEV is going up and is above 0).
This is the case for example with ATVI

Unless I do not look that good (due to the fact that I’m a novice user) but I don’t notice anything about the progress of LEV/SEV in the repository file PascalA_List.xlsx.

The only thing that I notice is the column N with the “extension”. This is negative. In the “How-To_EV.pdf” it is written that “It is not very useful and can be ignored.”
The 2D Thrust is also slight negative.
Is a drop of LEV than not of great importance?

2nd question: in the graphs of each ticket, the top figure gives the LEV and SEV. Are these numbers somewhere to be found in the daily excel reports? If they are of great importance, can they be added to the repository file?

[Pascal]

I’m still trying to understand all the different concepts of EV and the interpretation of the high amount of data in the different excel reports and graphs.

If I am correct then an important signal is given when the large players start selling (LEV is dropping and goes below 0) and the small players keep buying (SEV is going up and is above 0).
This is the case for example with ATVI

Unless I do not look that good (due to the fact that I’m a novice user) but I don’t notice anything about the progress of LEV/SEV in the repository file PascalA_List.xlsx.

The only thing that I notice is the column N with the “extension”. This is negative. In the “How-To_EV.pdf” it is written that “It is not very useful and can be ignored.”
The 2D Thrust is also slight negative.
Is a drop of LEV than not of great importance?

2nd question: in the graphs of each ticket, the top figure gives the LEV and SEV. Are these numbers somewhere to be found in the daily excel reports? If they are of great importance, can they be added to the repository file?

PDP,


Thank you for your questions.
When you look at LEV/SEV for a specific stock, you need to put this in context.
My back-test has indeed shown that if you buy a stock whenever you see LEV increasing for three consecutive days and sell X days after, you are on average performing worst than a Buy and Hold strategy.

The reason for this is that LEV/SEV are measuring an equilibrium and not an accumulation/distribution force.
LEV will show that large players are accumulating or distributing stocks.
The question is then why are they doing this? Is it a sign that the price will follow? Is it something specific to that stock, to that sector, to the whole market?

You have basically two methods to use LEV: the first one is to use the back-tested repository file ranking/rating, which will point to the most interesting long/short candidates. The second one is to use one of the divergence filters and study each stock one by one in its context.

Let's study the two methods:

1. The repository file
The idea of the stocks list of the repository file is to rank stocks starting by the most attractive buy candidates at the top and finishing by the worst stocks at the bottom. There are three criteria used to rank the stocks:

A. The LER (Large Effective Ratio) level (Ch 1 of the VIT book.) The LER measures the LEV divided by the total volume exchanged during an analysis period (a few days). After calculation, the LER is compared to past historical accumulation/distribution and a normalized value is given between 125 and -125. 100 means that accumulation is at the level of the past strong accumulations. 125 means that accumulation is stronger than past accumulations.

B. The AB (Active Boundaries) Level. AB (Ch 2 of the VIT book.) The Active Boundaries measure the situation of a stock within its trend. the upper channel of the trend is defined by UB (Upper Boundary), while the lower channel is defined by LB (Lower Boundary). Back-test has shown that stocks that are in an uptrend (UB + LB > 0) and close to their LB have a tendency to bounce there, especially when LER is high. This basically means that big money is attracted by a pull-back while the stock is in an uptrend. The closer to LB, the stronger the AB numerical value (AB is normalized between 100 and 0.)

C. The sector strength as shown in the SIGR file of Billy.

Each of these three criteria carries a weight of 1/3 to determine the total rating of the stock. In the filter of stocks with strong ratings/ranking, I only show those that carry a total rating higher than 80. To have such a good rating is mathematically impossible if one of the three criteria is very poor.

2. Specific stock analysis
Now, let's come back to analyzing a specific stock: SU

We can see that SU is in a down trend (UB + LB = 6.91%-29.12% < 0), but close to UB (expensive)
These figures can be found in the AB sheet of the repository file.



Large players are selling, even though the whole market has been attracting money and other stocks in the sectors are somehow bought. There must be something specific with this stock



The SIGR sector analysis shows that the sector is rather poor.



The Sector MF is also rather poor, although it attracted money yesterday and issued a buy signal



Finally, The standard analysis of SU shows that the yellow resistance band seems to be a good place to initiate a short trade.

[pdp-brugge]

Pascal,

Many thanks for your elaborated answer

I still do not get it 100%. Please excuse me for insistence.

My example stock is ATVI. I own this stock for the moment but I’m thinking of selling it because of the drop of LEV.
In the graph of LEV/SEV of this stock, the LEV is dropping and currently -1072.

According to your definition of LER (Large Effective Ratio) this is “LEV divided by the total volume exchanged during an analysis period”.

How is it possible that in the repository file PascalA_List.xlxs the value of LER for ATVI is at +125 and the LEV is negative?

[Pascal]

Pascal,

Many thanks for your elaborated answer

I still do not get it 100%. Please excuse me for insistence.

My example stock is ATVI. I own this stock for the moment but I’m thinking of selling it because of the drop of LEV.
In the graph of LEV/SEV of this stock, the LEV is dropping and currently -1072.

According to your definition of LER (Large Effective Ratio) this is “LEV divided by the total volume exchanged during an analysis period”.

How is it possible that in the repository file PascalA_List.xlxs the value of LER for ATVI is at +125 and the LEV is negative?

LER is a smooth average. hence, it is slower to mode than the LEV pattern itself.
We can see below that ATVI's LER is higher than the reference limit (which is the average of past tops), but that it has topped and is turning down.


Pascal

[pdp-brugge]

Billy, Pascal,

I’m still trying to better understand the different data to be found on your website.
A vast improvement is to fully understand the relationship between the different data.
This will also help my trading knowledge as I’m trying to make trading a second income.

The data for the different sectors in the Effective Volume website is to be found in three different places:
- “Sector” page in PascalA_List.xls
- Sectors_table.xls
- SIGR.xls

The relation between a stock and its sector is very clear as each stock has an associated sector in the “Stocks” page of PascalA_List.xls.
As Pascal made it clear, the rating of a stock is for 1/3 determined by the sector strength in the SIGR file.
The relation between a stock and the sector denomination in the SIGR is a little bit vague to me.

Could it be possible to post an excel list with for each stock the corresponding sector name as used in the SIGR file?

Many thanks

[Billy]

Billy, Pascal,

I’m still trying to better understand the different data to be found on your website.
A vast improvement is to fully understand the relationship between the different data.
This will also help my trading knowledge as I’m trying to make trading a second income.

The data for the different sectors in the Effective Volume website is to be found in three different places:
- “Sector” page in PascalA_List.xls
- Sectors_table.xls
- SIGR.xls

The relation between a stock and its sector is very clear as each stock has an associated sector in the “Stocks” page of PascalA_List.xls.
As Pascal made it clear, the rating of a stock is for 1/3 determined by the sector strength in the SIGR file.
The relation between a stock and the sector denomination in the SIGR is a little bit vague to me.

Could it be possible to post an excel list with for each stock the corresponding sector name as used in the SIGR file?

Many thanks

The SIGR file is made using the sector and industry group RS from IBD/Marketsmith. It keeps the IBD industry group labels.
Here is today's Marketsmith file with all stocks, industry groups and sector labels from IBD.
Billy
MarketSmith_-1112.05.xlsx