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sharks37

8,420 Posts.

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14/06/16

13:52

Post #: 18027426
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Originally posted by Jako64 ↑

Just to add a bit more to the above now that I am home again.

The "Private Trading Syndicate" (or old fashioned hedge fund) that Tom worked for, as I understand it, would mostly identify stocks with promising future F/A, or an expected consistent future newsflow, or a completely unwanted stock which they could totally dominate over a period.
Not just any old stock was targeted, they were carefully selected for a reason (eg - it was no good being a relatively small trading syndicate, attempting to accumulate the floating supply in a very large liquid stock, or in a sector they did not understand well etc.).

In some respects these private trading syndicates are the bad boys, or the 'cowboys' of the markets, and ran a very fine line with authorities at times.

Tom said these syndicates did not associate with each other, did not like each other, and if they crossed paths in the markets, would try to wrong foot or cause problems for the opposing syndicates, this was because at times it was other syndicates (and not just the retailers) who they were trading against.

Not all of these trades were the same size either, as I understand it.
Some accumulations were done, marked up, and sold, quite quickly - sort of bread and butter trading to pay all the bills.
And others were the big serious longer term trades, that became the champagne and caviar for the syndicate......so to speak.

In a nutshell, when doing a serious accumulation they would attempt to gain control of a stock by buying as much of the floating supply as possible, using any means possible (negative rumours in the media, or at AGM's & presentations, short selling etc).
Then once they believed they had control, they would change begin to change the news flow in the market to positive, and start the markup of price.
And once the price target was approaching, they would have planned a seriously big event (or rumour) of some sort, which would create strong demand, and they would sell into this demand over a period (and sometimes also set their short positions as well), then stop supporting the stock, and beginning the mark down.....

Finally - when Tom attended the AGM after the seven year accumulation, he was relatively new to the syndicate, so no one in the markets really knew him.
He stood up in the Q&A part of the meeting and asked repeated questions about an extremely large overseas contract it was believed was signed by the company.
The directors had no idea what he was talking about, and were shrugging their shoulders and were unable to answer his questions.......
But these rumours soon set tongues wagging, and inevitably started a buying event, which the syndicate initially supported, this then started a domino effect.
And as the price spiked up very strongly the rumour became more and more plausible to the market, and the syndicate then started selling into the massive demand they had created.

cheers

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Hi Jako, thanks for your comprehensive answer.

I have been progressively working my way through Tom William's book - its a lot to digest. Also been concurrently reading a book on same subject by Gavin Holmes - I find Gavin's book helpful because he delves more into testing demand, not just supply - I relate to that more symmetrical treatment of the subject because I trade both long and short.

Getting back to the accumulation process I have been gathering some more observations to my comment about the 5% holding level as a threshold to separate what I would call "short term" SM accumulation vs "long term" cornerstone investment - the distinguishing feature being in my mind SM accumulators are in the game for one cycle whereas cornerstone investors will ride several cycles for a longer term larger gain.

What I have noticed reviewing a number of stocks where the accumulation/mark-up process appears to have taken place (EMC, LPE, NUH - examples covered by 952i in STT thread) is that there may be change in sub-holder notices at the beginning of the accumulation period (each of the 3 above did so) but I haven't seen any cases of change in sub-holder notices during the accumulation period. So if the above 3 examples do fit the wyckoff model (and I think they do) then its not the entities declaring change in sub-holder notices at the beginning of the accumulation period that are doing the accumulation - they could not do so without issuing further change in sub-holder notices if their positions change by > 1% by ASX requirement. This means the accumulation in all cases is someone not breaching the sub-holder 5% threshold - as far as I can see.

I find this potentially interesting and why I think it is useful is because imo it offers a clue as to the potential length/duration of the accumulation period - because the limit of shares accumulated will be 5% of issued capital. So by watching the buying/total volume (roughly) it should be possible to estimate when to expect the mark-up period to start and when those signals appear confirm that it is a case of SM accumulation.

Just some thoughts from a VSA/Wyckoff novice...

Cheers, Sharks
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