In sync with the Institutions

[Gundini]

How important is this for you? I mean, if you are out of sync with the big boys, they take profit, and you get belted. I've been belted a couple of times. So how do you guys deal with Institutional profit taking? Do you try to get in tune with the institutions? Interested to hear your thoughts...

 

[theasxgorilla]

Volume moves the market and institutions hold the mass of funds required to generate trends. In essence, trend following of mid to larger cap stocks often involves riding the coat tales of the institutions.

If they profit take and shake you loose, what else can you do? Without knowing their reasons for selling (which you often don't until after the fact, if ever) you just have to decide on your maximum peak to trough drawdown and get out.

 

[Gundini]

Volume moves the market and institutions hold the mass of funds required to generate trends. In essence, trend following of mid to larger cap stocks often involves riding the coat tales of the institutions.

If they profit take and shake you loose, what else can you do? Without knowing their reasons for selling (which you often don't until after the fact, if ever) you just have to decide on your maximum peak to trough drawdown and get out.

I hear what you are saying gorilla, thanks, I mainly play the larger caps myself, with larger bets over a week or so, but I find myself watching the depth constantly for fear they will take profit. Of course I realize they could have bought the stock way bellow my purchase price, and what represents a reasonable entry to me on a pullback may already represent a $5 profit per share to them. Sometimes you see them come out to play, especially in the last half hour of trading. And often I see them moving from say MBL to BHP to ZFX, as if they are on a mission to increase their holding, and lighten up on others.

I am very stingy and patient when it comes to my entries, always on a pullback, always on a support line, or an upward trend line, and with supporting 26 12 9 MACD on Daily charts to boot, planing for a bounce, which most of the time happens. Do you think the Institutions monitor Daily MACD charts? What other staple tools do you think they would constantly monitor?

 

[theasxgorilla]

I'd be surprised if many fund managers pay attention to anything more than the 200-day MA and some basic trend lines.

Consider the contrast between the Australian book, "Masters of the Market" and the American "Market Wizards" books. Both Market Wizards books are full of interviews with traders who use technical analysis. Yet I have read "Masters of the Market" from cover-to-cover and can't find a single reference to technical analysis. Every interviewee refer only to fundamental and macro/micro economic analysis.

 

[wayneL]

I'd be surprised if many fund managers pay attention to anything more than the 200-day MA and some basic trend lines.

Consider the contrast between the Australian book, "Masters of the Market" and the American "Market Wizards" books. Both Market Wizards books are full of interviews with traders who use technical analysis. Yet I have read "Masters of the Market" from cover-to-cover and can't find a single reference to technical analysis. Every interviewee refer only to fundamental and macro/micro economic analysis.

This might reflect the bias of the author and therefore subjects selected.

Also, institutions have to sound smart. Talk of PE, NPAT, EBIT, BBB etc sounds a lot more hi-brow than "it just crossed above the 50MA"

 

[Gundini]

Is that right, well I am supprised. I thought Fundimental Analysis was a given, the first thing you would do to choose which stock had the best prospects for growth and return, then buy and sell based on the Tech Analysis.

Maybe I should see how the 200 day MA lines up with the major selldowns or profit taking. Interesting though, I read the Financial Review each day before the market opens (pretty useless really) but they use 90 day MA's as a default. Would have thought MACD would be a staple. I got a lot to learn.

 

[theasxgorilla]

This might reflect the bias of the author and therefore subjects selected.

Also, institutions have to sound smart. Talk of PE, NPAT, EBIT, BBB etc sounds a lot more hi-brow than "it just crossed above the 50MA"

I couldn't agree more. I just found it perplexing that there wasn't even a single loose reference to technical analysis. On the positive side, if they're not using it they shouldn't be too hard to beat then