t2K - take a look at the Thompson I (put MSFT in the ticker box):
thomsoninvest.net
Do you see all the "super sell messages"? Well, MSFT price still went up over 5 points on the day. How is that possible?
Here's how I interpret Thompson. The "supers" represent institutional limit orders of a larger size. If you see a bunch of "super sells" it *does not* mean that any of those shares actually sold (though some may have). What it means is the same thing as a limit order that you may put in - it expresses intention, not always actual execution. My interpretation is that institutions have certain price targets at which they are willing to buy/sell. The MSFT chart from Friday, indicated to me that institutions were willing to sell once the price reached a certain point. That does not indicate to me that the price is poised to explode. If there was no selling interest from institutions, I'd say, yeah, there is "room to move up". Now, this doesn't *necessarily* mean the price won't appreciate anyway, as that depends on several other factors. Some of course are news, which could change the minds of institutions - I'm discounting this, because from experience, it seems often institutions already are aware of pending news *which are stock/company specific* (the exception here is external news, such as a Latin American collapse, or Chinese currency devaluation; however, again, I discount this as a *positive* factor, because big external news which can impact the market tend to be negative - you can have the market collapse in response to China devaluing, but not likely soar because China has a good external trade balance). Or perhaps retail investors alone can push up a stock in the face of institutional resistance. That is less likely on a stock with a massive float like MSFT, *and* where institutions control a lot of the trading - if the float were small *or* the institutional presence in trading were minor, (like with many net stocks) - I'd say the odds were better... but take a look at the pie chart on MSFT from Friday, where even on huge volume, almost 2/3 of the trading was institutional.
Of course, we could narrow it down a little further: if most of those "super sell" messages were actually executed, then, then you could have a situation, where the the institutions had exhausted their selling interest/supply and the odds of moving up are somewhat better. This is not likely on a stock like MSFT, which is very widely held, but anyway. How to tell if those messages were only expressing interest, or actually got executed? One way is by looking at volume. If during the exact time-points where the "super sells" were appearing, the volume surges, odds are, that the volume came from executions, especially if the price which had been surging gets capped to a flat curve, or even declines. Unfortunately, I looked at that, and the evidency from Friday is not conclusive, although based on price action, it is possible that there was some execution starting from about 2:00 PM EST on to about 3:20 PM where the volume is also relatively heavy, and the price trends lower.
All in all, even so, I don't think that amount of selling, even if all executed would significantly exhaust selling interest on a stock with as large a float as MSFT.
Finally, the last bullish possibility is that the massive institutional selling was not a disposal of shares, but intraday trading (especially if shorting), where the shares would get re-bought later in the day. If that were the case, it would indicate not that institutions are interested in selling MSFT, but rather simple trading activity. Well, I don't think the evidence supports that analysis. If they were only trading, they'd be buying all the shares back later at a lower price. However, first, if you look at Thompsons, you see that there were far fewer and smaller "super buys" than "super sells" earlier, and second, after the big super sell around 3:20 PM EST, the price *rose*. Now, if they were "selling high and buying low" (trading), you'd see the price drop, and then big buying at the bottom. But what happened was not something that would have allowed for that strategy, as after the selling the price went up. What it is consistent with, rather is: the selling which occurred at 3:20 was the lowest price-point of the subsequent trading, therefore the price rise immediately afterward simply represented the absence of selling pressure and a minor bounce due to the small super buy orders.
For an opposite scenario, go plug in NITE into the ticker box. Here you see nothing but super-buy orders - yet the price went down. Well, what that tells us is that institutions are not selling very much, but retail folks drifted the price down on low volume (which I can indeed confirm having watched the LII on Friday - I saw a lot of selling come from ISLD, and very little from MMs - MLCO, and none from the main ax FBCO). So, does that mean it is very bullish for NITE? Not necessarily. Even though there was a lot of super buys, the *volume was very low* - indicating to me that most of those orders were simply limit orders that didn't get executed because the price never fell low enough (though the volume correlation with a time chart is slightly more bullish, thus indicating some possible minor accumulation). Also, note that compared to MSFT, the % of trading in NITE that is *purely* retail is greater in NITE, and therefore it is easier for strong retail selling to drive the price down in the absence of actual institutional buying. From my reading of all this, I see the following: what the institutions are basically doing is saying "we think it is low enough so we don't want to sell, but we are not willing to buy, unless the price is lower yet"; the price went down because of two factors - relative lack of buying interest (from instituttions and retail alike) at present prices, and stronger selling interest on the part of *retail* mostly. Therefore the scenario is not unabashedly bullish, despite the "only super buy" scenario. What would have been *very* bullish, is only super buy messages, *with big volume*, and a price rise.
Sorry for the lengthy post, but I wanted to give some background for my opinions, so you don't think I'm pulling them out of thin air.
Morgan
|
