Getting A Handle On Institutional Buying and Selling Using the Triple 9’s Alert
One
of our most frequently asked questions deals with the definition and
use of the Triple 9’s alerts to buy and sell, put out by several times a day by TraderWire.
In this trading lesson, I will describe the unique characteristics of this
intriguing and useful signal and show you some examples of how you might use it
to help you to anticipate some nice intraday moves.
One major caveat
deserves mention at the outset, however. Like many kinds of useful technical
indications and patterns you’ll run across, “Triple 9’s” alerts should
never be used in a vacuum without other corroborating technical factors. If
anything, I’d say that “Triple9’s” alerts are designed to give you an
edge, rather than to serve as stand-alone buy or sell signals. Treating it
otherwise would be foolhardy. With that in mind, let’s now proceed.
“Triple
9’s” alerts is a shorthand way to indicate 100,000 shares are up for sale
or are wanted for purchase on the NYSE by a single institution or possibly a
number of traders. Because of the many
differences between the NYSE and the Nasdaq rules, and the way shares to buy and
sell are shown to market participants, Triple 9 alerts only occur on listed NYSE
stocks where there’s an order book that a “specialist†oversees, as opposed
to the Nasdaq, where there is no one individual running the show all the time.
As an example, when more than one “triple 9’s to buy†alert goes out on
the TradersWire, it could mean one institution or several traders are
accumulating the alerted stock, and subsequently, the number of sellers will
dwindle with supply–as demand, and the price of the stock, rises. The reverse
of the preceding scenario could transpire from a number of “triple 9’s to
sell†on a stock.
There
are two schools of thought with regard to the best use of the “Triple 9’s”
alert.
-
You
can use it mainly as an excellent indicator of overall market direction on a
short-term basis. For example, if
more than one NYSE stock comes out in rapid succession with “Triple 9’s to
buy†alerts, this could also be an indication of a potential overall
intraday market rally. A trader using these criteria could better time the
purchase of a listed NYSE stock, even if the stock was not among those
alerted. -
You
can also use it as a general indication of whether conditions within an
individual stock lend themselves to a rise or fall.
Doing this outside of the context of the overall market is unwise. So
this approach really goes hand in hand with the approach I describe above.
Namely, you might see a flurry of Triple 9’s in the buy direction in a given
stock. This would alert you to the possibility that a pattern could set up
in that stock. At the same, you get a similar Triple 9 buy alerts in other
stocks, tipping you off to the potential for market rally. The stock you’re
following is an uptrend, but forms a narrow-range consolidation. It breaks
out. There’s your opportunity. As you can see, the Triple 9’s alert only
serves to call your attention to a stock in which you subsequently look for
an interesting pattern to develop–all within the context of overall market
action.
(
AVP |
Quote |
Chart |
News |
PowerRating) gapped open to a high
near resistance. There were four triple 9’s to sell during the first three hours
of trading, as shown in the intraday chart following this daily one.
There was no
immediate price movement evident in AVP after the gap-up open. The stock was
trading in a narrow range all day. But as shown, the stock went into
profit-taking mode the next day. That coincided with a sharp sell-off in the
market as a whole.
On this day, Nortel
Networks
(
NT |
Quote |
Chart |
News |
PowerRating) was in rally mode, as was the overall market. These two Triple
9’s to buy in such an upside climate, occurred as NT edged higher off two narrow
ranges. Thus, two Triple 9’s to buy occurred during favorable market conditions
and a progression through two pattern setups.
Here, Pharmacia
Corp.
(
PHA |
Quote |
Chart |
News |
PowerRating) sells off minutes after a triple 9 to sell alert. In this
instance, the overall market was choppy. But the breakdown from a narrow range
was good corroborative evidence of an opportunity to the downside.
There
has been a “mystique” surrounding the Triple 9’s alert because of its
interesting-sounding name. But at the end of the day, all traders must judge an
indicator by its raw usefulness. Triple 9’s are useful because they give a
suggestion that institutional buying or selling is taking place. That, however,
is the beginning of your analysis. The conclusion you draw about whether any
action is warranted, will come out of your determination that some synergistic
combination of the following has occurred:
-
Confirmation
from the overall market’s directional bias -
A
setup or triggering of a key pattern that builds around the Triple 9’s alert -
Any
other corroborative technical or fundamental indication (this can include
earnings announcements, group or sector leadership, relative strength, and
momentum)
The
Triple 9’s alert–worth paying attention to.
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