A Stamford online investment firm has devised a new feature called "Institution Watch," designed to bring block trading analysis to the individual online investor.
Developed by Tradetrek.com, the service provides subscribers with institutional trades by day and over the past month so they know when institutional investors are bearish or bullish on any given stock.
Institution Watch provides buy and sell histories of all block trades – 10,000 or more shares, or value of at least $200,000 – alerting the individual investor about institutions buying or selling any given stock in bulk above or below its current price.
"If a stock has dropped sharply in the recent past and you find out that institutions are buying the stock in many block trades," said Tradetrek spokeswoman Melissa Chefec, "it is a good indication that the stock will soon stop dropping and move up because institutional investors have come to the rescue with a large amount of capital and they usually would hold onto the stock for a long time."
However, "the opposite also is true if institutions are dumping shares," Chefec said.
Tradetrek has struck upon a good premise, but the program will perform at its best only if results are nearly instantaneously available, said Walter Dolde, associate professor of finance at Stamford branch of the University of Connecticut.
"It can work if you act very quickly into block buys before you believe the stock market has absorbed it into the price of stocks," Dolde said. "It’s critical to know if there’s any time delay. The price will have moved up or down."
The program allows the information to be on the Internet within minutes for paid subscribers, in time for investors to react, said Bin Li, chairman and chief executive officer of Tradetrek, which has 2,000 paid subscribers for its Silver and Gold packages of Internet-based investing information.
Gold package subscribers receive the information in real time, while information is supplied to Silver package subscribers in 15 to 20 minutes.
"We analyze the information as soon as it arrives. Our computers are continually computing the statistics," Li said. "A window of minutes if OK."
The company started developing the program about a year ago, and it has been well received by investors, who pay $39.95 a month, Li said, noting that the cost is less than a similar but more elaborate program offered by another information service to investment firms.
The program is one of several offered by the Stamford firm. Others include Money Trek, designed to improve trading technique; Neural Network, a five-day stock forecast and mid-term fundamental valuation model; and Pairtrade trading models for sophisticated investors.
