Chuzz: QT, I find that I am totally confused by this rating, and after looking at your explanation I find myself even more confused. Let me explain: For every share of stock sold, there is a share of stock purchased. When the demand increases (as a result of increasing investors' expectations) the price increases (because the supply is constant). And when demand decreases, the stock price drops.
QT: Yes.
Chuzz: The only way the supply changes is if new shares are sold by the company, or the company retires shares.
QT: If we define ‘supply' as ‘Total Shares', yes.
QT: Supply (Total Shares) when looked at from the methodology employed by IBD,emphasizes the management of shares when converted into money flows traded on a daily and a weekly basis. This information can be found under the heading "Where The Big Money's Flowing".
IBD: "You should always check the "Where The Big Money's Flowing" screens located at the beginning of NYSE and NYSE and NASDAQ stock tables. Those are sophisticated screens that flag the better companies that are up or down for the day on a big jump in trading volume. Unusual trading volume signals the flow of big institutional money into or out of a stock".
QT: "The Money Flowing" as defined above is tracked on a daily basis. In addition, IBD on Tuesday, publishes Institutional Sponsorship Rating averages.
IBD: "Institutional Sponsorship Rating averages the 3-year performance rating of all mutual funds owning that stock plus the trend in recent quarters of the total number of funds owning the stock plus the trend in recent quarters of the total number of funds owning the stock plus the trend in recent quarters of the total number of funds owning the stock (A = best, E = worst)
Chuzz: So, accumulation/distribution would mean something only if it were applied to specific investors. And you could only get that by looking at institutional holdings at such time as they report.
QT: Yes.
IBD: " This proprietary measurement is based on price and volume change and tells you if your stock is under accumulation(professional buying) or distribution (professional selling). You probably want to pick "A" or "B" ranked companies and temporarily avoid the "D" and "E" ranked ones. They are under liquidation in the last 3 months".
Chuzz: Note that O'Neil's method is proprietary, so we don't know what he is measuring and cannot judge the validity of the computation. What is it that I do not see here?
QT: When you posted your original inquiry you did not have the additional information you sought. I then took your original inquiry and broke it out in this posting so that in each part I could respond with additional input. Hopefully, this posting will give you a better idea of what his paper, Investor's Business Daily, is offering and more specifically what IBD's concept of Accumulation/Distribution means.
QT:The information may or may not be important to some. For me, when I started using IBD I was very much from the school of Peter Lynch (still am). In the beginning, I looked at IBD as something that may enhance what I know. As time went on, my knowing increased and along with that, my painful realization that I know very little!
As you and others on this thread and elsewhere know, the amount of information available to us is great and probably will increase. There is a great body of information out there and too little within me. I am always looking to improve my knowledge base. My current problem is deciding how much is enough and more importantly, how to best use the information I understand.
Part of the solution has been to accept,on sufficient evidence, that which I can employ that doesn't violate what I have been successful with in the past.
I may be slower than most to drop the bone I have, to grab the bigger bone,I think I see.
My growth from, what I still believe myself to be,an underdeveloped fundamentalist to a strongly and thoroughly developed fundamentalist, employing different information windows, has been slow in coming.
With too much frequency, when I think there is very little to be added on, there is something happening or changing that I feel impelled, to some degree, to look at with ‘fresh eyes'.
Many times my "fog clearing friend" I find that either I don't sufficiently understand it or I think it should be really gone into more thoroughly. Sometimes, I decide that something is worth understanding and then when I do get a reasonable understanding, I find, that while it satisfied my intellectual thirst, it did little for me in the way of instrumental behavior.
This area of information management is hugely important to me. It requires, for me, a certain degree of acceptance of that which comes from those who have successfully "walked the talk, been there, done that" and are willing to help others who want to move on to a better place.
I probably am older than most on this thread and did less then I had hoped with my years in terms of growing as an investor and trader. So I don't see myself as having the luxury of writing the "revised edition". I decided to read ‘the book', to seek and learn from those that have been and continue to be successful doing what they do. More and more I try to, selectively, spend more time in learning how to use good information in a better way.It is information and the execution of the information that is important to me.
Part of my leap of ‘qualified faith', if you will, has been to a very large measure, to accept when understood, that which may warrant further investigation and to use, when proven to my satisfaction, that which is workable for me. Unfortunately or fortunately depending on how we look at it, for me, it requires more and more, a certain acceptance, on my part, of circumstantial evidence as to what is valid. When the useable information comes from those I tend to trust there is less due diligence and more doing!
Sincere Regards,
QT
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