We often refer to institutional buying as one of the indicators we look at. What are you referring to?
Institutions include mutual funds, insurance companies and the like-stock buyers that have lots of money and buy large blocks of stock. To get large moves in stock prices on stocks other than those with very small floats, you need to have institutions buying into the stock. When trying to determine whether institutions are buying, we look at several factors. It is not an exact science-that is why you sometimes see us write that it appears institutions are buying. We look at block trades, publications detailing what mutual fund managers are buying and selling, what stocks are being accumulated or sold, and the price/volume action on individual stocks. Takes work, but we believe that large stocks need institutions buying in to keep them moving.
Many times we refer to buying a stock or option when the stock hits a certain level on a certain volume (usually on breakout plays of one type or another). This makes it difficult intra-day to determine whether you should buy in or wait until the day is over. While you can always wait until the end of the day, sometimes you miss out on a good move when it is pretty clear the stock is making a strong move. Although not totally accurate, we will look at how a stock is trading and look at the volume it has amassed after an hour of trading. We do some quick math to see if it would hit close to our target volume if it continued on that pace. As much of the volume occurs in the first and last hour of trading, this is not 100% accurate, but it usually gets us to the dance we want to be at. If volume is not there, we keep checking it-on some trading systems you can even set volume alerts for stocks, a very useful feature if you cannot or do not want to sit at the screen all day. Some will even page you when targets are hit. Technology is pretty cool. We still cannot understand why the Fed cannot see how pervasive and how incredibly huge the impact on us all will be.
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