Demand Chart Analysis
Shares of Estee Lauder are benefitting from a well formed Stair-Step pattern which has carried the stock through market turmoil since February. Three positive spikes (1 through 3) indicate major institutional buying to form a bullish Stair-Step and bright spot in an otherwise tough retail sector.
Famous Dave’s, an owner and franchisor of 151 BBQ restaurants, is experiencing a positive “1-2” spike pattern following several years of institutional distribution. Spike 1 represents an initial positive spike that is later confirmed by spike 2 to form the recognizable “1-2” buy pattern. Dave’s turned profitable in Q4 on same store sales increases and significant cost cutting. Discovering an LSI pattern such as this provides a great new prospect to resarch.
Small cap stocks such as Ion Geophysical tend to develop more aggressive Stair-Step patterns based on lower overall institutional ownership. Following an initial flurry of buying (circled area) decoupling the demand lines (green lines) from the share price (black line), we find three major spikes (1 through 3) that combine to form an aggressive Stair-Step pattern. This bullish pattern indicates heavy institutional buying. In addition, a small positive divergence pattern is also visible at A.
Shares of Expedia are under pressure with the formation of a negative Stair-Step pattern, visible through negative spikes 1, 2 and 3. Negative Stair-Step patterns represent heavy institutional selling over an extended period. Travel related stocks, in general, have suffered over fear that Amazon would enter the hotel and hospitality booking industry and a data breach at Expedia’s Orbitz division of almost one million users has driven institutonal investors away from the stock.
Despite shedding $9 per share since January, the Demand lines of homebuilder KB Home reveal a positive divergence pattern. Positive divergences represent buy signals under Demand analysis and develop when a share price falls against a positive to neutral Demand line. This formation indicates selling mainly from individual investors, not institutional.
First quarter 2018 earnings kick off with the large money center banks that led the market rally in 2017. Ahead of earnings, institutional selling dominate the demand patterns of JP Morgan, Wells Fargo and Citigroup.
Despite two recent negative spikes in JP Morgan, the overall pattern is neutral (blue) heading into Friday’s report. The negative spikes are notable however indicating a near-term pattern of institutional selling prior to its Q1 report.
The demand pattern of Wells Fargo is dominated by a negative spike at 1 weighing on its shares ahead of earnings. The overall demand pattern of Wells Fargo is negative (red) indicating a supply imbalance and net institutional selling.
Shares of Citigroup have been plagued by institutional selling activity since October of 2017 that has stunted its stock performance in 2018. Despite a small positive spike following the negative spike at 1, the overall trajectory of the demand lines has moved from flat to negative over the past four months.
The insitutional trend of Nike is mildly bullish heading into Q3 earnings after the close today. Following the positive spike at 1 and the lesser selling that followed, the Demand Chart of Nike reveals three minor institutional buying spikes (positive spikes 2 through 4) prior to earnings. Big news of Bill Ackman dumping his entire position prior to the report appears to have had no impact on the small demand imbalance currently in the stock indicating that there was ample demand to offset the sale.
Two major negative spikes dominate the trend of Oracle ahead of Q3 earnings indicating institutional selling and corresponding supply imbalance.
DemandInvesting reviews the institutional trend of stocks prior to reporting quarterly earnings.