Where The Smart Money Is - Volume Spread Analysis

Below contains 2 separate emails that I sent to my clients on volume spread analysis. Please read from the bottom

Do read

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Hi all,

Just want to continue from what we left on earlier on Volume Spread Analysis.

Over the past few days, we have seen ChinaMinZhong share price rocketed, not to my amazement.

The Smart Money has been accumulating this stock for a very low price of around 0.560 - 0.570 and their effort has paid off as seen from its current share price now of 0.66, high was 0.675.

In the last few days, Stage 3, which is distribution phase had already happen.

Will the share price go even higher? Very unlikely... unless they decided to push it even higher. In my opinon, the risk to reward ratio is not attractive at the moment.

From the chart below, we seen huge volunme in the past 3 days. These huge volume are profit taking volumes from the Smart Money.

Over the next few days, we might potentially see a sharp declination in ChinaMinZhong's volume first, then share price, unless the 0.675 resistance level is broken with strong conviction.

Very often, thin spread in the day will likely signify the end of the rally - No interests from the public and the Smart Money will just sell them regardless at which levels.

I think over the length of the two emails, the important message that I want to bring across when doing short term/mid term trade is that......

1) For every trade, risk to reward ratio must be good.

2) For all trades, have a target price and cut loss in mind, if you do not plan to hold it for long term. Many investors (gamblers) do not have a risk prudent strategy and while they win sometimes, they lose more than their winnings due to their inability to realising their costs.

From my Previous Email : (Please start from here)

This email is more of educational purpose and does not render a buy/sell call,

For the past few weeks, I have been reading on this concept called the Volume Spread Analysis and I have been attempting to apply these concepts.

Volume spread analysis, to simply put it is to follow where the smart money is. Smart money refers to the large instiutional funds/stocks operators or anyone who has the capability to manipulate to push up/down the stock. Volume spread analysis is used with technical analysis.

　

　

　

For it to take place, it usually requires four phaes.

1)Accumulate - Usually spans at least 2 weeks. Smart money will attempt to accumulate the stocks stealthly at cheap prices before the push.

2)Mark Up - To attract the attention of retail investors, they will attempt to push the stock prices much more than the accmulated price. Usually Marking up phase will have a huge surge of volume.

3)Distribute - Selling to retailers as they have accumulated at a much cheaper price.

4)Mark Down

- Self Explained.

　

　

Below is one example

In my opinon, ChinaMinZhong is in the early phase of its Mark up. I have been monitoring the counter for quite a while and then, attractive price will be @ around 560-570, which is in tandem with the accumulated price as well.

I might not be entirely correct but most of the stocks do behave like this.

If you are keen to learn/know more about volume spread analysis, do give me a call/email. I do mind sharing more of my personal read up/experience and materials with all of you.

Materials are shared from my mails to my clients. Just posting them to share as well =). Cheers