In this video we teach how to use the key information of a stock’s Institutional Ownership when stock trading. We share 3 effective trading patterns to use after researching a stock’s institutional ownership.
View Video Transcriptin this video we teach how to use the
key information of a stocks
institutional ownership when stock
trading hi I’m Mike bellafiore
co-founder of SMB capital and we’re
proprietary trading firm located in
midtown Manhattan and I’m also the off
of the trading classic one good trade
and the PlayBook in this video we share
three effective trading patterns to use
after researching a stocks institutional
ownership
[Music]
all right so we got a question from one
of the traders in our community who
asked how we think about the importance
of institutional ownership and so Max
was kind enough to put together some
thoughts as to how we use it why it’s
important how we find it so let’s talk
about that absolutely
okay so overall first what is
institutional ownership this basically
measures the amount of available stock
you know in a firm that is owned by
large financial institutions such as
hedge funds mutual funds and pension
funds so basically this is where most of
the money is in the market and this
could also be a indicator as to the
level of smart money versus dumb money
which is I usually considered to be
retail money so what you mean by that is
most of the money that is being traded
are invested is owned by these hedge
funds mutual funds pension funds
institutional traders exactly and we’re
tracking that because we think they’ve
got a lot of resources they’re smart and
they know better than their competitors
what’s going on with a particular
company exactly and there’s also just
overall a lot of resources for them to
drive the stock in a particular
direction so just kind of just like
going over the impact of this ownership
because of their buying power
there could be multi a day or week
trends that could develop because of the
amount of size that they are going to be
putting on and there could be clear
signs of this participation when a stock
is showing relative strength or weakness
to the overall market especially on high
or ball so usually you know like for
example if you were to track a
particular market stock versus spy the
sp500 and there was strong our ball most
likely there it is
be some big buyer out there who has
enough like resources to to buy itself
drive the stock in that direction and
then besides that just kind of seeing if
there is a accumulation or distribution
of a stock could kind of give you a
bigger picture idea as to where the
smart money believes that them that this
stock could be going in the longer term
and then this could help you try and
find setups that would be following this
trend on the intraday timeframe all
right and so before we’re starting each
trading session if we’re thinking about
trading a stock we say there’s certain
data you need to know about a stock
what’s the short interest where the long
term support and resistance levels how
much volume is done in the stock per day
what’s the news and the day what’s the
big picture idea for the stock but also
we want to know while we’re trading it
what’s the our vault but also we want to
know what’s the institutional ownership
of this particular name because it can
affect how it will stock something with
a high institutional ownership will
trade potentially differently than
something with a low institutional
ownership or a mediocre institutional
ownership so that’s one of the that’s
one data point that you guys are looking
up that we’re using as a firm and we
want to know before the open when we’re
thinking about trading a stock exactly
so just kind of going through a few
basic trading strategies that I’ve
noticed that could be very useful first
it’s a question I promised not to
interrupt well I will interrupt again
but at least for a couple minutes where
do you find where do you go to look up
institutional ownership so I personally
use thin viscom this is and it’s very
clearly on there you just type in the
symbol you scroll down you can see the
the
like short float all that kind of stuff
so there’s now a few basic trading
strategies first I’d like to just like
filter out for stocks with high our ball
this will tell me that this stock is in
play for the day and this could also be
leading to a larger move if the our ball
is not present then it’s possible that
either the institutions are not going to
be active in this day or just you know
overall the potential move it’s not
going to be as great so for an actual
trading strategy I like to use a V wop
trading strategy and the reason why is
because if let’s say a institution is
trying to accumulate stock they’re gonna
try to accumulate it as close to a view
up as possible so you should see on the
long side quick spikes off of V wop and
a very quick push away from price and
then like this will they tell you that
there’s a big firm that is active in
buying the stock because especially when
they are sending out the orders to a
market maker they are gonna be paid
being like the the market maker on how
close it was their average price to view
officers so they should be quite
aggressive when a price will I come back
down to a view up for the long side or
if it was a short trade than shorting
back into view op and besides this can
give you a very good risk award entry
because if let’s say from like the long
time that you were gonna buy the bounce
and then it leaks through vo on strong
volume then you would stop out but if
let’s say there you know it’s gonna be
that big breakout being able to add in
size with a relatively low risk could
then give you a good price actually
trade for that bigger picture idea and
then also it will just kind of like be a
second trading strategy is that it can
illustrate just like the the overall egg
market sentiment so for example if you
see a very big institutional buy set up
in Apple or in you know these big like
market stocks
could be telling you that overall big
players are trying to buy up the market
and then if let’s say you’ve found like
setups in other stocks bailing this
could kind of serve as more confirmation
for your long bias or you know if you
want just to trade over all spy as well
so now just kind of some examples just
kind of the first one being a Chipotle
ownership is 99.5 percent so this means
that most of the shares outstanding are
being held by big institutions visa is
similar and Google I put on slack here
as well because of the short float so
like just because there’s a strong
institutional ownership it doesn’t mean
that they’re all long so for example of
this 84% probably a good portion of this
17% short is by institutions and that’s
why sometimes like you can also see the
ownership over a hundred percent because
of these should be short float but kind
of just seen this like a combination
should tell you that big you know like
hedge funds mutual funds are probably
short this name and if you were trying
to trade this that you know like this
would be one on your watchlist for
possible short squeezes and there’s kind
of things like that as well so now I’m
just gonna go through three different
examples of when institutional ownership
came into play for me in just past
trades if you want to learn three real
world setups that our traders use
including the simple setup that we teach
all of our new traders and the setup
that turned one of our traders into a
seven-figure big money earner check out
the free webinar that we’re currently
running just go ahead and click the link
that should be appearing right now at
the top right hand corner of your screen
that’s gonna open up this free
registration page in the new window so
don’t worry you’re not going to lose
this video you’re gonna learn more in a
couple of hours from this trading
workshop then from years of online
education so the first one was a few
months ago of the stock was a mat which
is applied material overall as you can
see it’s just a very strong uptrend
institutional ownership is at 83% so we
see here on the open to kind of just
like trending up and then just right at
the open a big buy right so we go from
around 60 20 all the way up to around 61
60 waiting for this stock that’s a
pretty good move and then you see that
once this stock item that came back down
into view op there were very quick
spikes back up and then the stock ended
up trending past this high for the next
hour so if you were gonna you know try
to enter this trade seeing how the stock
was bouncing a view of should serve to
you as confirmation as well as the fact
that there was a very strong opening
drive that there are big institutional
buyers coming into the stock and because
this was other day after earnings the
the are vol was quite elevated as well
and there was the fundamental news
catalyst to actually justify this having
a relatively large breakout so by strong
opening drive we mean a nice move in
terms of price to the upside and volume
as well to the upside and elevated
volume when we’re actually going to the
upside as well for this particular name
and then we want to sort of see a
shallow pull in and hold above Viwa for
a good entry yes exactly and ideally
like you would see a pullback back to
view up on smaller volume than the then
the up moves as that would serve as just
one more check in your favor for the
stock pro org for this pattern to set up
so now just kind of be a second pattern
this was just more so a technical setup
so there wasn’t really that much of a
news catalyst but he recall believe that
this was like last month where Netflix
was in a very tight rein so it was
almost like no price movements and you
can kind of see just kind of there’s
like levels where Netflix was stalling
and then you know the the ownership here
is a 3% and then on this day was sort of
slow
zoom into here we see a very strong
opening drive which is a change in
fundamentals for this stock because just
like you know the last few days the
stock was barely moving three four
dollars intraday and suddenly we get a
five or six dollar move in the first
like 30 minutes obviously there is
someone out there that wants to buy this
stock up so correct the first check
would be like the strong opening drive
then there would be the pulling to V WAP
and then Li you see that that once it
actually pulled back in there was that
strong green bar and for you that could
be your confirmation that there is that
buyer out there and then let your stop
would like basically be below view up
and then as you can see that was a one
dollar stop and the trend doesn’t really
end you know until you make a lower high
you know apparently 314 so it really be
you know that’s a four to one risk
reward trade right there and you also
broke out you know prior resistance
points the with like mind as well so
just multiple checks in your favor and
like the filter was definitely the are
vol in a you know highly owned stock
just to sort of supplement what you’re
saying and I think there’s some people
watching that do not have your market
knowledge so we’ll we’ll help them out a
little bit so yeah I mean so you have
this high institute you have this high
institutional ownership those tend to be
players that are not trading on our
timeframe where we’re short term active
traders we are looking for news tak news
catalysts and technical catalysts we’re
playing our game they’re playing a
different game they may be longer term
investors they may be longer term
traders but they are investing large
amounts of money and because they’re
investing large amounts of money they
are making much fewer decisions they are
going to be in something for a longer
time period
they are gonna be more interested in
what the overall story is for the
particular name and that’s how they’re
playing the stock so something really
different has to change for a stock
that’s trending up and doing well for an
institutional owner to decide hey I’m
getting ready to get out of this
position or lighten up in this position
they’re not just looking at a resistance
level that they’re seeing intraday and
saying oh well there’s resistance here
I should lighten up like like maybe we
would do you know they’re not looking at
a a 5 minute chart and a 15 minute chart
and saying oh there’s an over extension
here I should lighten up or there’s a
breakdown on my moving average for the
first time or there’s two moving
averages that have crossed and now the
stock is below it so let me get out of
it that’s not what they’re doing they’re
making big decisions excuse me big
decisions with big money on longer time
frames and so and that can kind of cut
both ways right which is when they
decide it’s time to lighten up or get
out they leave footprints we can see
that and they can’t get their selling
done they’re lightening up done
generally within one day or they want
more exposure to a particular name they
can’t get that done in one day or two
days and they’re not just buying it for
it to go I mean you remember all the the
scuttle about is this gonna go to 420
which is laughable when we see where it
is today right you know when people are
like well it’s a short squeeze and know
it was institutional buyers who believe
in the name who were buying it up and
thought the stock could go much much
higher and it did and it did and so when
you have that elevated volume and you
have high institutional ownership and
you
see something breakout like we saw with
with with Tesla you know that’s not that
that’s not what’s going on there all
right so those are things that are that
are important I was just gonna add that
something it’s worthwhile understanding
when you have a stock like I’ll use an
example of Apple which I don’t know the
weight in the Russell 1000 index right
now but I’ll suspect it’s six to seven
percent
it’s a huge market cap and it’s very
difficult for a institutional diverse
portfolio to have six or seven percent
of their portfolio in a single stock and
when Apple is leading the market higher
like that and that portfolio manager is
arguably underweight and getting
measured relative that index every day
that apples up they’re underperforming
purely in the basis of that stock so it
creates kind of a chasing function where
they will be buying it up buying it up
buying it up just trying to keep up with
it and the obvious that can be true too
I suspect that’s what happened with
Tesla
everyone was bearish on Tesla no one
wanted to own it all of a sudden it’s a
hundred billion dollar market cap
company and you’re getting read relative
to an index you have not a passive but a
mutual fund and active mutual fund that
doesn’t have a fundamental perspective
on Tesla but they’re underperforming
every day because the stocks going so
they have to get in and buy it so that’s
another way that institutional ownership
can really impact the activity of a
stock so then after the final example
this was actually just like last week we
saw a very similar set up as well 80%
institutional ownership breakout on the
daily chart as well so you know overall
like setting up nicely for other
breakout move so we see yeah so we see
on the open that there was a strong
opening drive a very just like a tight
flag pattern so like the volume
basically died down from that opening
drive play so this is kind of telling
you that there’s like not that many
sellers here and then once like the
price broke from 94 it was on very
strong launch so that means that the
buyers are probably back in this name I
mean you can actually see is that once
like the stock broke on 94 it actually
skipped prices so
it went from like 90 405 to I think 94
20 in around one second so obviously the
you know there are big buyers out there
that are just hitting the offers so just
kind of like see like these patterns you
know and being able to accumulate in you
know a tight setup or on the breakout
and just you know being able to like
recognize that there is one or two or
like multiple big buyers out there could
just kind of add multiple points of a
confirmation and for this overall egg
market the odds are is that we only the
spies do actually fail it’s probably
gonna be in a similar pattern you’re
probably gonna see a 1% link down move
within the first 30 40 minutes and then
it’s gonna come back up to a V WAP and
if it fails you know like that’s a sign
that big institutions are probably gonna
start selling off their market stocks
and that this could be the start of
something more and to me you know until
that kind of you know happens I’m still
going to be in the mindset that either
we’re gonna be late range bound or just
like grinding higher because as you see
when the big institutions actually do
follow through the moves are quite
powerful and the risk word entries are
quite favorable now it’s your turn will
you use the stocks institutional
ownership in your trading after watching
this video and if so how will you use it
let us know by leaving a comment below
right now
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