123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Investing---Finance >> View Article

Distribution Days: How To Track Market Weakness In A Confirmed Uptrend

Profile Picture
By Author: Marketsmith India
Total Articles: 31
Comment this article
Facebook ShareTwitter ShareGoogle+ ShareTwitter Share

We all know the importance of market status in determining an investor’s stance in the CANSLIM system. It not only helps you realize gains by being aggressive when the risk is minimal, but also protects you from unwarranted risks of markets.

When the market is in a Confirmed Uptrend, it is the best time to make the most of your gains. This is when most breakouts are successful, and hence an investor who carefully tracks the patterns of his/her stocks can realize big gains. But how does one pre-empt the probable weakness in the market so that one can lock-in gains and play defensive with less or no exposure? A distribution day can provide a systematic and credible approach to that end.

What is a Distribution Day?

A distribution day is when a market representative index (for example, Nifty 50) loses more than 0.2% in a day, with volume higher than that of the previous session.
When a distribution day occurs, it hints that big institutional investors are exiting or reducing their positions in the market. Institutional activity is what moves any market, especially in India where retail participation is small.

How does it help in sensing market weakness?

When the market is in an uptrend, the intensity of market weakness is determined by the distribution day count. An investor keeps count of all valid distribution days (as per the above definition) during an uptrend. Successive distribution days imply a weakening market. But what threshold of distribution day count is enough to say the market is under pressure? A distribution day count of 2–3 is benign and usually normal in an uptrend. But when the count goes to 5–6, one should prepare to get his/her positions trimmed.

Distribution Day Expiry

Even though a distribution day hints that institutions may be liquidating their positions, it loses its impact after 25 trading sessions. A distribution day is also removed from the count after the index rallies 5% above that day’s close.

Read More About Indian Share Market Tips, Model Portfolio, Market News at https://marketsmithindia.com/

Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.

More About the Author

Investment advisory product based on William O’Neil’s CAN SLIM method with model portfolio, pattern recognition, idea lists powered by institutional quality data

Total Views: 29Word Count: 361See All articles From Author

Add Comment

Investing / Finance Articles

1. Sec Makes Ico Token Sales More Inclusive, Not Enough For Sec Commissioner Hester Peirce
Author: cbw,cryptocurrency

2. A Few Smart Ways To Boost Your Credit Score
Author: Asap Credit Solution

3. Small Business Guide To Growth And Accurate Taxation
Author: Prestige Accounting Solutions

4. Bitcoin, Bitcoin Gold, And Bitcoin Cash, What's The Difference?
Author: Taqi Ahmed

5. Wholesale Price Index Expected To Surge 0.66 Percent
Author: Stock Investor

6. Value Creation At This Time Is A Big Deal
Author: Stock Investor

7. How To Balance Your Daily Expenses When Paycheck Is Behind?
Author: Branden Whittington

8. Overdraft Changes 2020: Which Ones Are Getting More Expensive?
Author: Lauren Robson

9. Find Best Deals In Bad Credit Car Loans In Melbourne
Author: Centreline Finance

10. Accounting Rules That Should Be Know You
Author: petterson bennett

11. Beginners Guide For Forex Trading In Thailand
Author: Taqi Ahmed

12. Some Of The Most Frequently Asked Questions About Business Loans
Author: Alpa

13. Nigeria Credit Cards
Author: o3cardsseo

14. What Is Forex ?
Author: andrian chase

15. Arrangement Of An Audit Of Personnel Records At The Enterprise
Author: Petterson Bennett

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: