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Yo Tommaso,
* The stated (by Joe Grenfell, I think it was) goal of technical analysis is to
find out early what "smart money" is doing and jump upon the band-wagon.
* Wether the "owners" of a company contistute this smart money is open to
discussion.
* If a person or an institution ownes a 50+% stake in a company, of course they
have strong hands. These hands may be bound, however. Just imagine what would
happen to price if they unloaded, say 50% of their holdings all at once!
* Next, 'big players' are in the market for different reasons & have different
strategies. Fund managers are always scurrying to at least equal their benchmark
indices; banks often have policy meetings once a month which means they react with
a time lag; foreign investors are mostly very quick to sell on bad news without a
thorough analysis; etc. etc.
* This means that we as not even small- but rather micro-investors don't have to
worry about our impact on the market and so can be much more agile than the big
boys.
* Allow me two small tips that have served me well on a couple of occasions:
1. Re. "Company Owners": Insofar as they are insiders, I'm sure you know that
their actions are published as 'Insider Trading'. This often turn out to be an
excellent *contra-indicator* because an insider tends to 'tunnel vision' as far as
his/her company is concerned with all the concomitant distortions.
2. Sometimes a big player will nudge a market across an important indicator or
support/restistance by executing big buy or sell orders. If price runs in their
intended direction they stand to make a pile; if not you can be sure they're well
hedged. If you observe such an event: eg. Resistance broken for a day or so,
whereafter price drops back (Steve Nison calls it a "spring"), you nearly alwas
have a strong signal. In fact I've personally gone one step further, and mainly
trade false signals (Jack Schwager has pointed this out as "The most important
rule of chart-analysis").
Kind regards & Happy Trading,
Jan Willem E. Roberts
Tommaso Galanti wrote:
> Jan Willem
> Very fine job!
> In a concise mail you have clearly summarized many very useful insights
> I will treasurize. Thanks very much.
> Now a new question about Efficient Markets.
> IMHO:
> a) the major part of a Company's shares (let's say e.g. 60% at least)
> are owned by those who control it; they usually don't put them on the
> market because take profits from the incomes of the Company;
> b) the other part is freely exchanged within the market participants,
> among which are big Firms, Funds and traders. The formers are the
> 'strong hands', meaning they have a lot of buying power: they place
> trades to join their own profit goals, determine the major movements in
> market prices;
> c) individual traders/investors (many of us) usually have at their
> disposal computers, real time data feeders etc., but have very low
> buying power in respect of the 'strong hands' and their actions aren't
> cohordinated and synergic, so are able to produce just very low price
> movements, in respect to those produced by the 'strong hands': just the
> 'noise' we can see in the price charts.
>
> So, IMHO, the strong hands determine the trend of the market and if a
> trader wants to profit he has to understand what the s.h. are doing and
> follow them: this is the sense of the old adage "Trend is your friend".
>
> Are those points of wiew in the right direction?
> TIA for your opinions and nice trading
>
> Tommaso Galanti
> Italy
>
> J.W.E. Roberts wrote:
> >
> > Hi Tommaso,
> > Welcome to the Forum! Re. your questions:
> > .... <snip><snip> .....
> > 3. We operate in so called "Efficient Markets"; which I rather call
> > "Information Saturated Markets". In practice this means that soon after
> > somebody has developed a really good trading system, everybody starts using
> > it, which in turn means that it will not work anymore. As a point in case
> > you could have a look at the time honoured 200-day MA: The number of bear- &
> > bull-traps in conjunction with it has grown enormously since people use PC's
> > to analyse equities. To put it differently: In the market-place, when you
> > start behaving along established lines there's sure to be some guy who'll
> > skin you alive.
> >.... <snip><snip> .....
> > Hope this helps & that I've not turned too fatherly (patronizing). Happy
> > Trading,
> > Jan Willem Roberts
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