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Hi dom1_1998,
Saturday, July 19, 2003, 10:49:43 AM, you wrote:
d> I can understand increased volatility when the public is trading a
d> stock. But don't you find it strange that you are able to trade
d> an institutional stock when institutions are by nature long term
d> holders and not in and out traders to induce movement.
I think the key is that when institutions decide to accumulate or
divest, it typically happens over rather long periods of time. So
when they are accumulating, you buy the dips, because they are going
to buy the dips. And vice versa if they are dumping it. So on that
basis, it makes sense I think. Now, once all the institutions have a
position, and none of them are juggling it -- then we have a long
term consolidation I guess.
There are a LOT of institutions, too. And some are pace setters and
risk takers, while others are rather timid followers. And few if any
of them put positions on all at once, or take them off all at once.
That is the key perhaps.
And when they are putting them on in a hurry, as they were here in
Tokyo in early June, the volume evidence will stand up and scream. It
will literally be like cold water on the face, or should be. Anyone
who didn't figure out what was happening in Tokyo by about June 6
probably should not be trading stocks, just buying and holding. Yes,
by June 6 we'd already had a pretty good move off the April lows. But
that first week of June price and volume expanded explosively. Anyone
paying attention got at least 60 percent of a very nice move, even
coming in that "late". But the naive speculator only looks down from
the heights at that point, seeing risk. Volume and price however told
the experienced speculator that the risk was in standing aside. It
was institutional money, and it was in one hell of a big hurry.
These institutions also prey on each other as well, with the early
birds often taking some advantage of the late comers. They get a
move going, finally dragging secondary institutions in, and then sell
into those institutions when they feel price has reached
unsustainable levels for a particular point in time. This gets a
nice pull back going, which is exactly what they want, as they are
going to put a second large position on at a price that has already
been surpassed, but they want to reduce risk by banking some big
capital gains on the first position (which they overbought for that
very reason) before establishing a second large position at a higher
price. So they game you and me, and they game each other too. It's
the same thing you or I would do if we controlled that kind of money.
Yuki
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