Listen: Tim Collins, Las Vegas Sands, United States discussed on MAD MONEY W/ JIM CRAMER
"Welcome back to our special technical Nicole. Show the next crucial thing for technicians whether stock is overbought and therefore ripe for pullback or oversold maybe ready for bounce you determine whether stock is over border oversold sold by charting the ratio of higher closes also known as the relative Strength Index. RSI The relative strength index is a momentum. US later that measures the direction is stock is going and the velocity of the move. We like to match the relative strength of an individual stock to something else perhaps a relative strength of its sector or maybe that of a larger index and we measure the price action is. We're always looking for nominally. We're strength stands out because that's the sign of payment move perhaps a momentum switch that we wouldn't know we just read the research on a stock for relatives. Shrink trump often turn to bob lying in Tim Collins. Both of whom done remarkable work on this topic and you hear about all the time on the show. Many technicians vary the length of time time over which they measure relative strength. Both lying calls a shorter periods of time. Ten days two weeks to get a beat on the relative strength this they look at. They're looking for any pattern that reverses the action the previous period. Because that's the sign that breakout or breakdown of some magnitude might be upon us. They love strong relative strength situations but they also liked the time under bought after pullbacks get better entry point it really care about basis typically when a stock it's overbought. It is ripe for pullback because overbought stocks uh-huh with many buyers reaching taking supply tend to snap back if they've gotten too far away from their longer term trend line. The inverse can be true to a stocking Kim full so far so fast that you should expect a snap back. Because it's technically oversold use these terms we see these patterns constantly. They're reliable indicators that had changing directions action is about to occur. These terrific action points people if you're debating buying stock if you've done all the research and you find this is over. I usually tell you to wait for pullback. That almost always always comes. That's because lying collins have done enough chart work to know that the vast majority of stocks overshoot directions and then retrace some of those moves back to better entry or exit points. Hey retracement isn't necessarily native charting. Though is periodically. Some stocks are so strong they bank breakthrough through all the ceilings of all traditional get measurement periods. And then they stay over brought props for weeks at a time to find the historical trading patterns that have hitherto the to trap them within the bands of extremes. They defy the notion inevitable gravitational pull of the old equilibrium mind and just can't be contained by any of the various ceilings that overbook overbook conditions usually bump into and come crashing down from. When you spot these highly unusual moves? You know what you may have to strap yourself into get real moonshot and we slit can go look at this one. This is what I mean. This is rare but when it happens it's big money. We saw it occur in July of two thousand nine as Dan. Fitzpatrick pointed out to me using using is to cast exhaust later that's another momentum indicator that helps spot of bottom this time in Las Vegas Sands this summer. This daca Vegas One of the largest casino couples who have very important in business and Mikhail get charges hadn't repeatedly stalled at ten bucks level falling every time it hit boom boom boom. You know just not working okay. But when the Bulls finally broke out there was no stopping them in the stock gained relative strength. etre push through instead of regroup and recover from its overboard status. That's a very rare pattern. You see this thing. It just stayed overbought. Which told you good things ahead? It never retreated as you would have expected buyers wouldn't quit despite this being over bought and that is a sign. The strongest kind of positive move in the book might be taking place at any given anti-china expected to pull back but no you had that gigantic long-term overbought this stock proceeded to go from ten dollars to forty eight dollars pretty much in a straight along with no substantive back to to speak up and overbought condition can stay. Overbought is a golden opportunity for a huge move. Okay came right back to being overbought again. Remember I like to marry the fundamentals charge so I'm not too dependent on the pictorials what was happening underneath this chart that it was able to stay over for so one we know what was going on right. Then that's win. The chief locus of profits for Las Vegas Sands when from being vegas to Macau the only place in China gambling is legal the change transform. LVS Ask from Associate Nevada Gaming Company into an international powerhouse. The might as well been named the CAL Santa the charts told you about the transformation well ahead of the Wall Street ails who were still days east that we had such a horrendous declined to begin with. They weren't thinking about Macau here the charter school thinking there's buyers lurking vitamins and other key tool charts. They use that to spot pivots. We say that vitamins a lie detector. Okay telling US weather move is for real or not when there is a small move on light volume that technicians like like Newark but when there is a small move on heavy volume the charts drill down laser like to see if it's a precursor to something bigger and infinitely more tradeable charter. Art Art all times looking either for accumulation on big volume me that large money. Managers Begin to accumulate stocks aggressive way or distribution. That's a synonym for selling of Stott. What and that could telegraph a big decline? They measure these moves by something called an accumulation distribution line when the calculation accumulation distribution arcane arcane involved in the I know it is charting of whether stock closes higher on greater volume or on any given. Day versus Lower Levine. Get any brokerage house wax. Offer you the kind of Charleena Ordinance website. I care about it because it can go against the grain of conventional thinking about the stock. And that's what I love charts so much go against the fundamental. Sometimes and sometimes they're right. We saw them being right in Monsanto in July of twenty twelve. This was an unbelievable one that I completely got wrong. Thank Heavens for the chart. I didn't care for the stock at the time I didn't like GMO's kind of biased. You Know Tim Collins sort another way. He said the accumulation distribution line so that while the stocking down days they were on light. Five all the down days you had low lines here and then law heavy volume and the updates. That's a sure sign. That more money was flowing into the stockton caused such a consistent persistent accumulation or buying pattern versus the distribution or selling pattern convinced him that large funds were building petitions tone. The stock long-term not to rent it for a quick move. It turns out that what I didn't see what I was so confused about. was that Monsanto. A stock had started to be correlated with the place of corn which was higher back then because of Newfound Aman for ethanol and gender by government price supports I. It was far too concerned about near-term earnings and worries about a shortfall and wasn't thinking big picture but the charts Soju big picture. The work of Collins told you not to fear here it was showing that something bigger was developing. Just the quarter. He was dead right and a stock that I would have kept you out of turn out to be a big winner when court shot up taking Monsanto on Santos stock and its earnings up with it. The big boys knew the relationship. Cornyn Monsanto's business you were able to piggyback off their research by using colleges work it's isolated the real underlying strength in the stock as depicted by the accumulation distribution line got smoked. He saw bottom line. We we need to look at lots of different indicators to spot big moose indicators like accumulation distribution overbought oversold levels despite important terms that might not be visible otherwise to those of US stuck trying to spot changes in the fundamentals it often are further out in time powerful moves cannon overdue allude those who are only focused on the underlying companies and not the action of the stocks themselves selves. Danielle Annoy. Dan Bremer. Yeah thank you for demystifying market and helping us make make it accessible. Well that's what I want to understand their money. That's my goal. How can I help thank you? I'm wondering if I start with a small opposition in a stock company like and the stock just keeps going up the most it comes down is maybe two two and a half percent. How can I get a size is a sizable stake? Money says you missed it. That's one of the things discipline will cut will cut off the downside which is far more important than cutting off the upside. And if you bought what a position their stock and it just kept going you can get anymore. Well it's a trade and you gotta take it. I know people don't want to hear."