What's up with the FaceBook Accumulators?
05/24/2013 : UPDATED CHARTS Since my prior post, the FB Market Pressure (MP) Accumulator accelerated its motion lower (first chart below). The MP measures supply and demand, not trades. So the motion shown on the chart beginning on the 20th, indicated a real shift in the amount of supply coming into the market for FB.
However, the Liquidity Accumulator, which does measure trades, gives us a much less bearish image of what is actually going on inside the tape. While there have been clear cut sellers in FB, there are buyers taking this stock in at lower prices. This is why the liquidity accumulator isn't plunging as the MP has been over the past two and a half weeks.
05/20/2013: UPDATED CHARTS: Since my last posting on April 23rd, FB reached new highs for this cycle in the $28 range. Starting on May 3rd, the price of FB has declined while both FB Accumulators held a sideways pattern until May 16th. Shown below are the two FB Accumulators: the top chart is the Market Pressure (MP) Accumulator, the lower chart is the Liquidity Accumulator. The MP measures demand while the Liquidity measures buying and selling pressure (actual trades).
We can see in the charts that as price declined, both demand and the actual level of buying or selling stayed fairly balanced, evidenced by both accumulators being fairly flat. One would normally expect to see the accumulators fall if price falls. When they do not, it tells us something very important about the market for the security being analyzed. We can see that starting on the 16th, the liquidity accumulator turned back up indicating that as price fell, more volume was being bought as price fell indicating institutions were buying into the decline, not selling.
However, today (May 20th), we can see that the MP declined rather sharply and the liquidity rose. The move in the MP today reflects an institution coming out of a position throughout the day, the decline in the MP reflecting an increase in supply, especially at 3:30pm. The rise in the liquidity accumulator tells us that institutions were there to buy the stock that was being put out today.
Bottom Line: We'll need to continue to monitor on Tuesday-Wednesday of this week. Typically, this pattern results in a reversal in price back up. The MP is extended down and we would expect to see this accumulator reverse on Tuesday.
04/23/2012: UPDATED CHARTS: The FB Market Pressure Accumulator, shown below, started rising again into the lows in early March. Notice that while the price of FB has declined from $28 over the past two weeks, the MP has declined much less. Notice that while price has tested the lows again near $25.50, the MP is very much higher now than it was the last time price was at $25.50. This is positive divergence and it indicates that demand has continued to remain strong during a period of price weakness.
The MP measures supply and demand, not transactions. While traders (including algos) can affect intraday price moves, portfolio managers determine intermediate and longer term trends. The MP, more than anything else, measures and reflects the trend in supply and demand from these managers and hence is a very useful tool for longer term traders and investors.
FB releases earnings in about a week and so it will be important to continue to monitor the MP during this period. Based upon the data in this chart, the MP supports higher prices.
01/11/2013: 9:00am UPDATED CHARTS: We continue to see strong demand coming into FaceBook which has accelerated since the beginning of the year. Shown below is the FB market pressure accumulator. I have been very bullish on FB since mid November when the market pressure accumulator showed strong positive divergence into the 2nd test of the lows below $20 (see first post below). Since then, the market pressure accumulator has continued to rise, especially during periods of weak price behavior shown in the 15 minute chart immediately below. Throughout most of December, price made a slow decline within a narrow range. However, the accumulator continued to rise displaying positive divergence which meant that there was strong institutional demand. Then, demand surged, see 2nd chart below.
Shown above is the 5 minute market pressure accumulator. We can see the very strong surge in demand that began with the new year. I continue to expect higher prices until such time as we see negative divergence. When the market pressure declines as price rises, this is negative divergence and it means that supply is coming in as price rises. Negative divergence means lower prices as shown in the AAPL market pressure accumulator below which has been down since September of 2012. When AAPL looks like FB, we'll see AAPL start to recover (see AAPL page)
01/03/2013: 9:00am UPDATED CHARTS: Since the prior posting on 12/26, the main FB accumulator, the Market Pressure, has continued to show very strong positive divergence into any moves lower. Notice how from the 26th-28th of December, as price declines the accumulator rises. This is positive divergence and it indicates that the demand for FB increases as price declines. Then, notice how strongly up this accumulator was yesterday, shown below. This accumulator has been very strongly up since FB moved below $20 and continues to indicate higher prices moving forward.
12/26/2012 UPDATED CHARTS: We follow the Market Pressure Accumulator on FaceBook which measures overall supply and demand. This Accumulator started rising aggressively in late October (see below) and has maintained its up trend ever since. FB is prone to some rather sharp vertical swings caused by excessive algorithmic trading. It is my opinion that many of these downdrafts are caused by algorithmic systems selling insider positions over a range of prices. But I am seeing fewer and fewer such programs. What is important to note is how such programs do not affect the pattern established by the Market Pressure Accumulator which is quite bullish. Intraday price declines caused by algorithmic programs offer buying opportunities and should not be viewed as overall market selling.
12/12/2012 UPDATED CHARTS: The Liquidity Accumulator, which had been showing selling due to the insider lockups, have turned up very strongly starting on 12/6. New highs coming.
12/6/2012 UPDATE CHARTS The FaceBook Market Pressure Accumulator picked up a very large increase in supply again on 11/30, causing this accumulator to turn down rather quickly as FB moved beyond $27, shown in the first chart below. The Liquidity Accumulator, the next chart, also registered an increase in selling pressure on 11/30 as well and continued to show selling pressure the next day as FB moved above $28. (continued below)
One would expect to see some profit taking into the highs above $27 after a 35% move from $20. So we will need to continue to watch both of these Accumulators over the next several days. The largest accumulation of volume since the move up from the lows is approximately $25.90 which should contain any downward move in price. That level is identified by the volume at price gray bars at the left and the white horizontal line I have drawn on the price bars shown in the chart immediately above. Price moves quickly through levels that have volume nulls and then holds resistance or support where there are large volume spikes.
11/30/2012 UPDATED CHARTS We have been in FaceBook now since it dropped below $20 because the Market Pressure Accumulator, shown immediately below, was showing consistent demand (see 11/19 post) and told us to buy into the low (as it did on aapl). Notice that on the 26th and again on the 29th, this Accumulator has shown a huge increase in demand, price responding accordingly.
We have also been watching the Liquidity Accumulator, noting that it had been reflecting the selling pressure due to the insider lock-ups. We can see that in the early portions of the rally from $20, that they were still selling into the move higher. But that stopped on the 20th as you can see in the Liquidity Accumulator above. The Market Pressure Accumulator does not consider trades, whereas the Liquidity Accumulator does.
Bottom line here is that the stock will continue to rise until we see a drop off in the Market Pressure Accumulator which shows no sign of that yet. The gap from July 26th has been filled which has been my first upside target. But, given the strength showing in both Accumulators, I would expect to see $30 during this move. I am not concerned about a move back to the lows--that was a gift!
11/27/2012 UPDATED CHARTS In my prior posting, I said that the supply coming into FB was depressing the Liquidity Accumulator, but that the Market Pressure Accumulator, which measures overall demand, was rising and showing positive divergence into the lows at $20 consistently. We can see in the Market Pressure Accumulator, shown below, a huge rise in demand as the stock moved past $23.
The Liquidity Accumulator is shown immediately above. While it did not show any positive divergence into the lows below $20, due to insider selling as I described in the post on the 19th below, it too rose as FB moved past $23.
11/19/2012 The Accumulators measure 4 different aspects of how a stock is trading. Using them, we can determine whether there is net buying or selling, a change in liquidity or a change in demand. Knowing these things, you can determine how a stock is trading and whether support or resistance levels will hold or fail. You will also be able to determine when 'they're selling into highs or buying into lows'. (A recent example: AAPL postings )
Typically, it's pretty cut and dry but sometimes it's more complicated. Case in point: FaceBook. Shown immediately below is the FaceBook Liquidity Accumulator. Divergence is the main pattern that the Accumulators make and we can see below that there is none showing. Yes, there's the hint of negative divergence during the recent rise from $20, but nothing that I would consider major. So this Accumulator is telling us that, overall during the time period shown below (10-04 to 11/17/2012), there is net selling. Given the lockup expirations, this shouldn't come as a surprise.
However, the Market Pressure Accumulator, immediately above, tells us something totally different. The Market Pressure Accumulator measures demand vs supply. It is showing positive divergence as price has made equal lows and the Accumulator has made a higher low. This tells us that the demand for FB has outstripped the supply coming into the market. Hence, this Accumulator tells us to expect new highs in the stock and aggressive investors should be buying into weakness as the opportunity presents itself.
When FB is active, HFTAlert shows that there is very heavy algo trading. It is very important for users to know that this trading is primarily market making algos and not algos seeking to trade the stock over a range of prices. The supply is so heavy that these orders are simply fed to the machines and they process and trade away the stock. This is why you see huge intraday range bars on the 1m chart. I have observed hundreds of thousands of shares trade within a few seconds at very wide price ranges.
At some point soon, the supply of FB will greatly diminish and if the Accumulators continue to show strong overall demand, FB will move back toward the old highs.
If you want to watch these and other Accumulators running during the day, please send me an email and I'll send a link. (firstname.lastname@example.org)