Portfolio Adjusting
                       Institutions are constantly  increasing  or  trimmingexisting portfolio positions based on valuations, and they are  also  addingnew positions or deleting underperformers from the portfolio.  For  example,a fund might have held a maximum of 10 million shares of AOL and because  ofthe first-quarter froth and subsequent weakness, the fund may have cut  backto 4 million shares. With the stock now down over 60% from its  highs,  fundmanagers might again decide to  start  adding  to  the  position.  Once  thedecision to add to a position is made, it often attracts  the  attention  ofother large players. This is what trend reversals are all about.                       Reversals like this usually  take  place  around  the200 day moving average as more institutional players become  confident  thatthe move is for real.   As  the  perception  sinks  in,  the  Generals  jumpaboard.                       Another example  would  be  an  institution  that  istaking a bearish top down view of  the  market  and  now  must  realign  itssector weightings. The theme would favor stable earnings, quality, low  betaand yield, which translates to consumer, staples – utilities, energies,  andmaybe gold. Energies and golds both usually do relatively  well  in  a  bearmarket. This defensive list of groups would be overweighed and sectors  suchas high beta technology stocks would be underweighed.      This flow of money moving between  sectors  is  very  visible  becausemost institutions are on the same page. It’s just that  some  are  ahead  ofthe pack.   A good example of this is when many of the  institutions  loadedup on some of the techs during the market  crack  from  July  –  October  of1998. Two other recent examples of money flows going  into  unloved  sectorsare the energies and basics during  March  and  April  of  this  year.  [SeeCharts Later in Chapter]                       The selection process will detect these  moves  basedon price and increased volume in addition to increasing  relative  strength.When stocks  trend  they  become  tradable  for  day  traders  as  the  manydifferent institutional players get involved.                       Day traders that select stocks from a matrix of  highrelative strength and earnings are by definition  picking  the  stocks  withthe best technical and fundamental prospects to move  significantly  higher.The institutions will have to own and overweight many  of  these  stocks  ifthey are to beat the S&P 500. Their research analysts will  continue  to  beour research department.                       The following charts address the topics that  I  havejust discussed.   I provide brief analyses at the bottom of each chart  thatshould draw together the various points I want to emphasize to you.
America Online (AOL)
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                       1. & 2.  WRB (Wide  Range  Bar)  breakouts  on  panicvolume. If you did not get in  at  1  the  left  behind  portfolio  managersentered at 2, afraid they would miss a further major move.                       3. This run up from an ascending triangle  was  againon a WRB or Runaway Move as Mark Boucher refers to in his course. He  refersto them as a Thrust Breakout, Breakaway LAP, and Breakaway GAP.                         This   AOL   example   contains   three    favoriteinstitutional patterns that they  will  aggressively  attempt  to  breakout,market permitting.