THOMSON I-WATCH

https://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_unusual?side=O

Could someone explain to me why a website as helpful as Thomson I-Watch can't have a more straightforward URL? Such is the world of mergers and acquisitions, ecommerce style, I suppose. Thomson Financial + Lycos + (apparently) Quote.com = one tricky uniform resource locator. I threw in Quote.com because of the 12 links at the top of the page that features I-Watch, which is an interactive, graphic display of institutional buying and selling, nine take you to resources at the Quote.com website. Of the other three, one -- the message-board -- currently is not functioning, another of the 12 takes you directly to the Securities and Exchange Commission's EDGAR database, and the third takes you to I-Watch.

I recently wrote an article for Working-Money.com looking at some of the ways that average stock investors, speculators, and traders could gauge accumulation and distribution in the market. That article focused on price and volume clues, stage analysis, and the role of the Big Money. With regard to that Big Money, I quoted William O'Neil of Investor's Business Daily, who wrote in his book How To Make Money In Stocks that Big Money sponsorship of stocks was a Big Deal for the average investor:

If a stock has no professional sponsorship, chances are that its performance will be more run-of-the-mill. The odds are that at least several of the more than 1,000 institutional investors have looked at the stock and passed it over. Even if they are wrong, it still takes large buying to stimulate an important price increase in a security.
In that Working-Money.com article ("Accumulation And Distribution," August 15, 2006), I mentioned a few places where investors and traders could go to find information on this "professional sponsorship." To that set of resources, I want to add another: I-Watch, from Thomson/Lycos Financial/Quote.com.

WATCHING THE DETECTIVES

I-Watch is a really fun website -- or section of a website, however you prefer to call it. I-Watch tracks and rates institutional buy and sell "messages" as a way of gauging the interest that institution buyers have in certain sectors as well as certain stocks. As they say at the outset:

Thomson I-Watch offers individual investors a window into the previously closed world of institutional trading. Before completing large block trades, "Big Money" traders express their interest by posting ("advertising") buy or sell messages, revealing the short-term supply and demand for a particular stock.
The most basic way to use I-Watch is to start with its Market Overview of nine different industrial sectors (basic materials, conglomerates, consumer goods, financial, health care, industrial goods, services, technology, and utilities). The first bar graph, "Today's Institutional Activity for all Sectors," lists all nine sectors and uses color-coded bars to indicate the level of buying or selling interest on the part of large institutions. This color-coding is used to describe four different conditions; "Buy Super Messages" are in dark blue and "Sell Super Messages" are in dark red. "Super Messages" let traders know the exact price and size of stock that the institution is looking to buy or sell. These notices are referred to as such because of their specificity, but traders are warned that this is a double-edged sword. While "Super Messages" give retail traders insight into the thinking of large institutions at that moment, their relatively short-lived nature means that the picture they paint of a given stock (that is, in demand or not) may not be long-lasting.

The other two message types are "Buy Interest Messages" and "Sell Interest Messages" appearing in light blue and light red, respectively. Here, the message is less explicit, reflecting more the institution's "interest" in buying or selling a particular stock. As I-Watch notes in the helpful "how to profit" guide, "Generally, the messages serve as a means for the broker/dealer to say to institutional investors, 'Give me a call, and we'll talk about a trade.'"

The y-axis (the vertical axis) on the I-Watch charts represents "message volume." Generally, a higher message volume means more interest-buying or selling-in a given sector or a stock.

Other options include the "Today's Most Active Industries" chart, which shows the top 10 industries that feature the greatest amount of institutional buy and sell messaging over the course of the trading day.

By clicking on the colored bar in either the "Institutional Activity" or "Most Active Industries" charts, an investor or trader will be transported to a different page, "Today's Most Active Stocks in the Overall Market." In this context, this title is a bit of a misnomer. When you click on a bar in one of the "Industries" charts, it will show you a different page with the nine most actively traded (or messaged) stocks in that particular industry or group. So when I clicked on the "Technology" bar in the "Today's Institutional Activity for all Sectors" chart, I got a similar-looking I-Watch chart that listed Conexant (CNXT), RF Micro Devices (RFMD), Applied Micro Circuits Corp. (AMCC), United Micro Electron (UMC), Avanex Corp. (AVNX), Taiwan Semiconductor (TSM), PMC-Sierra (PMCS), Broadcom (BRCM), and Amkor Technology (AMKR). The differing sizes of the bars-and coloring-helped indicate which of the nine were attracting the most interest in the industrial sector that was attracting the most interest.

I-WATCH STOCKS

Clicking on an individual stock's bar in I-Watch brings up a new type of chart called "Search by Stock." This chart, which can be accessed directly from the home page, looks specifically at a single stock, noting both sector and industry, and providing options to look at the chart in a variety of time periods (today, one week, one month, or "select date") as well as in five- and 20-minute intervals. Below this information is a price chart for the chosen duration. Most notable are the dark and light red and blue arrows scattered above and below the line that indicates price movement. These arrows, much like the buy and sell messages of the other I-Watch charts, indicate heavier buying, moderate buying, moderate selling, and heavy selling.

The position of the arrows indicates when that buying or selling took place, with a cluster of arrows in any one area indicating either a source of institutional resistance (a cluster of red arrows pointing down) or a source of institutional support (a cluster of blue arrows). The size of the arrows is used to indicate the volume of buying or selling interest at a specific instance. I-Watch's guide provides additional tips toward using these charts effectively, including how to spot buying into strength, buying into weakness, selling into strength, and selling into weakness moves by broker/dealers, and what those moves might mean for the retail investor or trader.

Below the price chart is a volume chart that lets investors and traders graphically see what kind of volume is accompanying stronger or weaker buying or selling interest. The bars in the volume chart are color-coded in the same way that the bars are in the other I-Watch charts (dark blue, light red, and so on). Finally, I-Watch features a "Today's Unusual Activity" chart. You won't always find a chart in this category-which actually pleases me insofar that I'm encouraged to believe that this means that no mere garden-variety "unusual" activity will be enough to trigger I-Watch's sensors. "Unusual Activity" is measured in I-Watch's charts by contrasting average buy activity in dark gray and average sell activity in light gray with today's (the unusual day) buy activity in dark blue and today's sell activity in dark red.

I-Watch is a blast. The website came to my attention courtesy of a colleague who was working on an article discussing institutional buying and selling of stocks. Because I'm especially interested in sector rotation as a key driver of stock performance (allegedly, stocks receive as much as 70% of their movement from the performance of their sector), she showed me this website as something that could suit both our purposes. I've found I-Watch particularly interesting when stocks that I'd thought had been left for dead were slowly (or not so slowly) starting to attract institutional interest. Rather than wondering why a given stock is being accumulated, I can quickly note the sector, and take both the sector and the stock to my favorite charting package for further analysis.

However you choose to use I-Watch, I suspect that if institutional intentions in the marketplace get you scratching your head, this is one website that will go a long way toward soothing that itch.

--David Penn, Technical Writer


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Originally published in the October 2006 issue of Technical Analysis of STOCKS & COMMODITIES magazine.
All rights reserved. © Copyright 2006, Technical Analysis, Inc.