Nov 28, 2011- How I Analyze Price Action and Broker Transactions

 

 

I’ve always wanted to know the answer to this personal question of mine.

1.) Which stocks in the Philippines are “more or less” controlled by only a few big brokerage firms, so that I can use this knowledge in order to determine the price action in the short term for the companies that I’m following?

Without further ado, the way I answered this question is merely by analyzing companies one by one.

For this post, I’m going to analyze the following companies, mainly because they are actively traded in the markets, and I’m personally intrigued on what’s happening in these stocks.

For purposes of explanation and clarification, I’ll cite MEG as an example in my hypothesis testing:

For the past 3 years (2009-2011), We have witnessed that MEG’s price behavior is to rise strongly without pauses, and to consolidate its strong gains afterwards in a long sideways consolidation.  We can see that longterm (1-2 year peso cost averaging for the past 2-3 years) will still be in the money for holding their MEG stock (if they started their buying since 2009).  At last close of Php1.77 for MEG, I wanted to check who are still controlling this stock.

Unfortunately, I can only go as far back as July 23, 2010 for my investigation, because that’s the furthest I can go to from my historical brokerage transactions tool.  Nevertheless, my investigation shows that MEG, which can look cheap at 1.77 for value investors, will have a lot of “churning action” dilly dallying between 1.75 to 2.00 at least in the short term, because there are still many sellers for MEG in the 2.00 region.  Nevertheless, there are many buyers at 1.75 or lower, which should limit the downside.

(In order to make the data neat, I only considered net buy/sell of Php100Mil or more) –

In my humble opinion, this shows us that there’s still a lot of consolidation and sideways price action to be expected from MEG.

 

* I guess you can try to make this same analysis to your favorite stocks that you’d like to accumulate, so as to temper your expectations.

From a Short term perspective, things are different.

Using Sept. 1, 2011  as our starting point, and analyzing until present (Nov. 28, 2011)

We see that in the short term, only ATR-KE, Deutsche and CLSA are selling MEG, while Macquarie, Aurora, UBS, Abacus and ValueQuest find values at current levels (1.80-ish).  For now, it looks like a three-way tie, and a consolidation will likely ensue for the stock.

(I dunno, do you agree?, What do you think?)

2.) Another question I’ve long tried to answer as well, is what are the largest players in the pond doing with their money, so that I can at least be aware whether they’re in a selling spree or in an accumulation frenzy, for me to be better aligned with how I position myself in the markets.  This comes from the knowledge that those who have more money, can affect the way the stocks will trade in the short term.

Scope of Analysis:
For today (Nov. 28, 2011), I settled on analyzing only the top 10 brokers affecting 75% of all the value traded in today’s markets.
Studying what Broker 209 (Aka Deutsche) has done for the past 3 months, shows that they’ve been very bullish on SMC and ALI for a span of 3 months now, and have been selling most of their positions with the rest.  They look to have a lot of cash to deploy, as they’ve been selling a lot of stocks (most particularly) – TEL,ICT, BPI,AGI,MBT,MEG,AP and URC.
Whether it’s just a positioning or what, Broker 209 seems to have been the main culprit for the sell off of our index the past couple of months, and it will be interesting to know when Deutsche will likely buy back all the shares they’ve been selling in the markets.
Broker 209 Transactions from Sept 1, 2011 to Nov. 28, 2011
Repeat this for all the other brokerage firms, and let me know what your analyses lead to.
– Faceless Trader
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5 Responses to Nov 28, 2011- How I Analyze Price Action and Broker Transactions

  1. Hi FT. Just thought that this interview of a contrarian hedge fund manager might interest you: http://www.mebanefaber.com/2011/11/29/fireside-chat-with-hendry-and-drobny/

    Like

  2. Duane says:

    Hi FT,

    This is really an interesting way of analyzing stocks. I have a couple of questions though. Maybe you can help me out.

    These questions may be simple, so forgive me if they are:

    Why do you assume that these brokers would have a one-side view of the markets on a specific time? Aren’t these brokers, as it is defined, only transacting on behalf of its clients which probably have different views of the market? I’m guessing, but does this mean that these “Brokers” are in fact proprietary units that trade for the broker itself (hence, they have a one-side strategy, like long MEG this month).

    Thanks a lot, and keep posting these interesting articles.

    Like

    • Well ur right. My assumption that brokers would have a one-side view of the markets is faulty. That’s a very important assumption I’m making, and if their intention is to deceive (to make us think that they’re buying when they’re actually selling, then the analysis is completely wrong.).

      Normally brokers are acting for their clients, but their clients can sometimes trade a lot so I try to make assumptions like that. But you’re right. It’s a faulty assumption to make.

      Like

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