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THE MARKET WHISPERER 20 1

of shares in one transaction. Large-quantity buyers are prepared to pay a
little more than the market price based on the premise that if they try to
buy within market activity, the price will be pushed up. A seller approached
by an institutional trader knows that if he or she tries to sell a very large
quantity within regular market activity, it will force the price down, and
the seller will then receive much less than the price offered by the fund.

However, by law, these out-of-exchange transactions must be reported
to the stock exchange, which means that the trade volume will appear on
your trading screen without its impacting the balance between buyers and
sellers, and therefore does not affect the stock price even if the trade was
executed at a price higher or lower than the price currently traded on the
market. A fund will try to obtain 80% of the total planned quantity in this
way. It will then go about trying to purchase the remaining 20% slowly,
carefully, quietly, in small quantities each time, direct from stock exchange
sellers. This volume-dependent process may take from several days to
several weeks.

The next stage is of great interest. The fund is already holding a large
quantity, and is now interested in signaling its interest to the market,
which causes the stock price to rise. The fund starts buying in the market,
creating volume and price highs which arouse interest and draw the
stock price to greater highs. The price trends up even more strongly, and
additional buyers, noticing the resonance, join the trading. This in turn
thrusts the price to even higher highs. Since a large portion of liquidity is
already held by the fund, the path has been paved for the stock to climb
virtually without resistance.

Does this sound a bit fishy to you? Who said the stock exchange is the
epitome of fairness?

How to Interpret Large Volume at the Daily High

When a stock breaks to a high on the daily chart, we can often see at the
high an extreme volume increase, known as climactic volume. It usually
takes some time until the public is convinced there is a real story behind
the breakout, and begins to buy. The reason for the climactic volume is
public enthusiasm. When, usually with some delay, the public is finally
persuaded and buys en masse, the “big money players” move in: these
are institutional sellers taking advantage of the highs and large volumes
in order to be rid of large “blocks” of stock while the uptrend is at its
highest. We call this phenomenon “selling into the power.” Sellers cause