Institutional   Behaviour

What I believe about global economic/fundamental factors affecting price:

• Dominant factor theory (DFT) - there are only one or two major drivers of price during any multi-year period (all other fundamental factors are noise-makers)
• Conventional wisdom (what most investors and talking heads think and what most financial media report on) completely miss the fundamental factor.
• By the time the marketplace figures out what the dominant factor has been, a new dominant factor is silently emerging as the new driver of place.
• A very small subset of trading operators (perhaps less than 1%) will understand in real time the factors driving price.
• I have a better chance identifying the dominant fundamental factor by looking at charts with imagination than by monitoring financial/social media.

By Peter L. Brandt

I came across a tweet on my tweeter account @spotlightamin last week with the above quote from Mr Peter L. Brandt, a 40 year trading veteran.  I found this to be so appropriate at this time when we constantly hear the print and broadcast media spouting gloom and doom in the market.  We constantly hear the talking heads and self proclaimed GURUS on CNBC, Bloomberg tv and other media about the trade wars, brexit, inverted yield curve, pending recession fears,impeachment hearings.  Its all noise in the market while the market just keeps tugging along.  Market data on the other hand reflects something quite different.  I have often said that one should let the data drive our decisions as a trader and investor instead.

Looking over the data for 2019, here are the empirical facts:

1. $SPY - the proxy for General Market Performance is  + 22.50%  year to date.
2. $QQQ - the proxy for Growth Stock Performance is + 29.92%  year to date. 

Wow!    wow!    wow!

That's a phenomenal performance.  It's the institutions that actually drive the market since they have the power of huge amount of $$$ that they invest daily in the market.  That is why it is so critical to understand the stock chart behaviour reflected on price and volume on the charts.  Institutions can't hide their behaviour when they start accumulating shares of a stock they are interested in.  Once you learn to recognize the fine details of the stock charts with skyscraper volume (surge in trading volume that is 3 or 4 times the daily average trading volume) or the gap up in price of a stock, you quickly learn to take appropriate action of initiating a stock position in stocks that the institutions are showing an interest in accumulating.

Stocks Institutions are showing an Interest 

Here is a list of stocks that have either gapped up in price or the stock has risen 20% or more within 3 weeks and they are trending along the 10 day sma(simple moving average) in the last 2 weeks.  These are the stocks that no one hears about on the daily chatter in the news media.  That is why it's best to look at the  stock charts and the data instead.

1. $ALGT
2. $AMKR
3. $ATKR
4. $BLD
5. $BRKR
6. $CRUS
7. $FTNT
8. $IPHI
9. $LRCX
10. $MKSI
11. $MKS
12. $OLED
13. $ORLY
14. $QRVO
15. $RNG
16. $SPXC
17. $TPX
18. $UCTT
19. $UFPI
20. $ROCK

Please look over these stock charts and make a note of their price behaviour.  I shall discuss some rules for ideal inititial entry points and an additional entry point as the stock continues to trend higher in the price from institutional interest.

Happy Trading!

Amin

https://youtu.be/UW_EUo0Zrz4