Goldtent TA Paradise

GDXJ, GDX – Weekly ACC/DIST Patterns

1. Music Man says:

   April 22, 2018 - 2:54 am at 2:54 am

   Guessing here, but I think that’s about to change.
   By the way, collectible silver coins ,I have observed, have recently been changing hands at somewhat lower prices. Time to buy silver?
   Thanks Silver Fox, for posting this.

2. Northstar says:

   April 22, 2018 - 3:04 am at 3:04 am

   Approaching some kind of turning point I’d say. Thanks.

3. Mserr says:

   April 22, 2018 - 8:51 am at 8:51 am

   You failed to show the accumulation over the last six months while prices have gone nowhere

4. Jonno says:

   April 22, 2018 - 10:42 am at 10:42 am

   Actually the way Accumulation / Distribution indicators are calculated need to be taken with a grain of salt.

   Almost all of them are based on the closing price of the period. So for example if the price closes higher than previous then traded volume has positive value and is considered “accumulation” and vice versa for “distribution”.

   The problem here is that it is quite easy for smart money to disguise their true intentions.

   One variation is by accumulating a sizeable position during the day at a higher price but then at the end of the day sell down a small volume and just enough to either keep a cap on the price or even price it so that it closes lower than previous period. Another variation is smart money just churns their buys and sells throughout the day. However when they buy they are buying more stock and when they sell they are selling less stock. They then rinse and repeat over time until their desired position is filled. Using the above as examples indicators will show price going nowhere or dropping so that it shows distribution when in fact stock is actually being accumulating.

   The only true way to determine whether a stock or an index is being accumulated is to look at the TICK level and aggregate the positive and negative traded volumes to determine the net volume accumulated or distributed during a period whether it is a day, week, etc. So if net buyers are more motivated than net sellers more trades will be purchased at the ASK price which is net accumulation. If net sellers are more motivated than net buyers more trades will be transacted at the BID price which is net distribution. And for accumulation / distribution at the index level this is just an aggregate of net stock positions in the index. You also need to look at the trend to determine whether there is weak or strong accumulation or distribution happening or just market noise and market taking a neutral stance.

   By analysing trades and volumes at the TICK level no-one can fake accumulation and distribution even using iceberg orders. But the way current indicators are calculated which is based on end of period (i.e day, week, etc.) unfortunately it is possible to fake.

   • silver fox says:

     April 22, 2018 - 8:16 pm at 8:16 pm

     Jonno,
     I have no knowledge of such things. Perhaps you are right. To be clear, are you saying that the OBV oscillator is of more value than ACC/DIST oscillator? Just asking. Thanks.

     • Jonno says:

       April 22, 2018 - 10:15 pm at 10:15 pm

       Hi SilverFox OBV, ACC/DIST, etc all use similar calculations to try and determine if a stock is being accumulated or distributed. See the following link on how OBV is actually calculated so you get an idea on logic:

       https://www.investopedia.com/terms/o/onbalancevolume.asp

       In theory if price closes at the end of the day higher than yesterday then one could say folks are buying / accumulating and vice versa. However in practice that is not always the case especially if smart money want to build up a position but keep a lid on price so they don’t have to pay too much for their overall position which might take days or even weeks depending on liquidity.

       Eg. One can still build up a sizeable position by just buying at the ASK when there is sufficient market depth. Yes this would increase by a tick from that transaction but then one can later make a smaller sale at the BID to return price to a net change of zero or even sell it lower so it appears that price is dropping. Then when weak hands see price is going nowhere or dropping and they want out, they will usually place sell orders at the ASK unless they are selling at market. When sufficient market depth appears at the ASK again, another buy transaction is done at the ASK by smart money and then they sell a small order at the BID again to keep a lid on price. This process is repeated until position is filled. Of course there are many ways to disguise accumulation but that is one example.

       Another variation to above and you can experiment yourself if you feel so inclined is to just buy and sell the same large volume of stock to yourself on an illiquid penny stock. This has the effect of creating a volume spike in the charts for the day but nothing material has actually changed except your commission costs. However volume spike may trigger off some market scanners to imply stock is suddenly active and being accumulated but it is not really the case.

       There is nothing off-the-shelf market that can accurately measure accumulation / distribution via the tick level so all you have to work with is OBV, ACCDIST, etc. but just beware of limitations.

       • Olyeller says:

         April 23, 2018 - 11:15 am at 11:15 am

         Thanks for the very informative comments Jonno. You can see the accumulation in miners continuing this morning with gold and silver down hard. Sellers are drying up as the GDX continues to carve out a bottom and remain in an uptrend which began on the global equity panic reversal low on February 9th. I believe the miners are telling us that $1300 gold is going to hold before breaking out in Q2.

5. YYZ says:

   April 22, 2018 - 5:09 pm at 5:09 pm

   Thank you Jonno for the education.