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By: thewoof2, Christopher Gallon
Apr 27 2012 8:23am
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Your MTGO Stock Analyst - Looking at the Big Picture

In my previous two article I discussed the reasons to make card purchases based on fundamental and then technical analysis.  And while this was a good start, it was a myopic or short sighted view.  That is why I am now writing to talk about identifying and leveraging a more global view into our stock research reports.

Let me start with an example to help show what I am talking about.  Let's say you are in the market to purchase a house - you want a house that is $200,000, newer, 2500 square feet, 3 bedrooms, 2 bathrooms and has a magic online game room in the basement with a stocked beer fridge.  So you grab a realtor and find your dream house that has everything you want for $200,000.  Are you going to buy it immediately?  What if I told you the house was in a town where property values had fallen 10x, the crime rate was increasing year over year significantly and because the town was in such disarray no other house sold for more than $50,000 for 10 years with the same characteristics as yours?  Ok, so you probably get my exaggerated point, macro factors should play into any buying decision.

The stock market is no exception, overall market factors need to be examined to make a strong buying decision.  And I am here to say - Magic Online card purchases require the same scrutiny.

Market Indices (aka Index)

One large step in understanding a specific market is by looking at Indices.  Most of you have heard about the Dow Jones Industrial Average (the Dow), the S&P 500 and the NASDAQ 100.  These are considered the largest stock market indices.  Price movements of these indices are one critical way to understand the larger picture around any single stock. 

What is a Market Index?

Quite simply an index is a combination of stocks that represent some segment of the market.  So the Dow Jones index comprises of 30 stocks (referred to as constituents) representing "blue chip" stocks of US "industrial" companies.  There are many indices created to show a larger market view of any segment - from energy, financial and technology indices to name a few key sectors.

How is a Market Index calculated?

In its most simple form, an index is calculated by adding all the stock prices of the constituents and dividing by a divisor.  Without making this more difficult than it has to be, the divisor is used to maintain price consistency when artificial changes are made to the index (for instance the changing of a constituent).  So if an index has stock A at $10 and stock B at $20 then its price will be $30 to start.  Then if I decide to change out stock B for stock C (at $18) then I will add a divisor to maintain price parity of 0.933 so that the stock remains at $30 ($10+$19 / .0933).

I am bored - when do we talk Magic...

So I started by stating my analysis thus far has been myopic.  I am here to say I am taking a step forward towards a larger view with the creation of some Magic Online sector indices.  So the first step is to identify key sectors in Magic that can help isolate a market.

Key Sectors

  • Format:  Standard, Extended, Classic, Pauper… you get the point on this obvious sector.
  • Color/Land:  Again obvious … Blue, Green, Black, White, Red, Artifact and Land.
  • Rarity:  Mythic, Rare, Uncommon and Common.

Indices can be created for each sector and as a combination of sectors.  For instance, an interesting segment might be Standard Blue Mythics, or Classic Rare Lands.  If we had these indices we could look at this segment of cards and get an understanding of the larger market forces of that particular segment.

Creation of Magic Online Indices

So for this article I want to create two indices:

  1. "Woofs Standard 30” or the WS30 – This index will be the top 30 tourney cards that show price movements in the standard format as a whole.
  2. "Woofs Standard Rare Lands 15” or the WSLands – This index will be the top 15 tourney cards that show price movements in the standard format for just Rare Lands.

WS30 Constituents

Huntmaster of the Fells

Geist of Saint Traft

Liliana of the Veil

Snapcaster Mage

Primeval Titan

Phantasmal Image

Gideon Jura Sword of War and Peace Batterskull Birthing Pod Phyrexian Metamorph Elesh Norn, Grand Cenobite
Blade Splicer Sword of Feast and Famine Thrun, the Last Troll Wurmcoil Engine Elspeth Tirel Ratchet Bomb
Runechanter's Pike Sorin, Lord of Innistrad Solemn Simulacrum Day of Judgment Grim Lavamancer Consecrated Sphinx
Dungeon Geists Slagstorm Vorapede Isolated Chapel Glacial Fortress Inkmoth Nexus

WSLands Constituents

Vault of the Archangel Isolated Chapel

Sulfur Falls

Clifftop Retreat

Woodland Cemetery

Razorverge Thicket

Glacial Fortress

Drowned Catacomb

Rootbound Crag

Inkmoth Nexus

Seachrome Coast

Darkslick Shores

Copperline Gorge

Blackcleave Cliffs

Kessig Wolf Run

 

 

 

Now let's take a look at these indices and their April performance.  Because of my limited data and to help look at the overall price movement I have added a trend line charting close prices.

WS30

Observations:

  • Overall trend line is showing WS30 very slightly increasing in April.
  • Candlesticks show a lot of indecision from buyers and sellers, with $10 swings back and forth.  This is less than a 3% swing over a 3 week period which implies relative price stability.
  • In summary, prices are relatively stable but trend is slowly increasing over April.

 

WSLands

Observations:

  • While I do not have the March data to prove it, it looks like a correction occurred in mark 1 of April for WSLands.
  • After mark 1 price has been stable with a very slight uptick in the trend line.
  • There seems to be some indecision from buyers and sellers after the correction in mark 1, this could be signaling a resistance point from the decline and poising WSLands for future increases in price.

With the creation and analysis of the WS30 and WSLands indices, this leads me to this weeks stock analyst report.

April 24, 2012 Stock Report Copperline Gorge

  • Sets: Scars of Mirrodin
  • Reprinted:  No
  • Recommendation: BUY 4.0 out of 5 stars.
  • Non-Foil Price (as of 4/24/2012): $2.42
  • Foil Price (as of 4/24/2012): $3.65
  • 6 month target non-foil price:  $4.00
  • Approximate Non-foil price 4 months ago:  $1.60
  • Card Category*:  Dual-faceted
* Card Category is a determination of the cards use in tournament play, casual play or both (dual-faceted).  There are certain cards whose value will be primarily due to use in a tournament but have little casual play appeal (e.g. Anarchy) their category will be tournament.  Alternatively certain cards have primary value in casual play but little tournament appeal (e.g. Nicol Bolas, Planeswalker) whose category will be casual.  Where there is some appeal for use of the card in both tournament and casual play the category will be Dual-faceted.
Copperline Gorge


Highlights: Copperline Gorge is a rare land that produces Green and Red Mana.  Key benefits include:

Tournament Use:  Card has seen play primarily in Standard.  (see deck lists below)
Casual Use:  Card can be used in multiplayer and single player games.
Notable card interactions:  N/A

Investment Rationale/Risk:

  • At its current price Copperline Gorge is priced below other similar critical lands for their respective deck colors such as Seachrome Coast and Darkslick Shores.
  • Dual mana producing lands are a staple for any decks using their colors, therefore helping them retain value.
  • In the event of a banning of Delver of Secrets, blue will lose some power opening up the possibility of increased use of green and red.
  • Conversely, a risk is if blue does not get cards banned and with the upcoming set having powerful blue cards then it could result in less use of red/green decks.

Technical Analysis

Comparable Indice Indicators

See WS30 and WSLands index charts above.

  • As mentioned, WS30 shows standard cards holding steady therefore signaling market stability.
  • WSLands shows market indecision (Doji candlesticks) after a steep decline in early April. 
  • Looking at these comparable market indices - the WS30 has bounced back from the mark 1 decreases, yet WSLands have not equally.  At a global level, I feel lands are a critical component to any standard decklist and should at least mimic or exceed the non-land cards.

Copperline Gorge Chart

Copperline Gorge

 

  • Similar to WSLands, Copperline Gorge fell on mark 1 but since has held steady with a lot of indecision between buyers and sellers. 
  • While the trend line has a slight decrease in price, Copperline Gorge looks to have also met a resistance level indicating a rebound is likely.

Summary:  Copperline Gorge is a critical land card for any deck running a green and red mana base.  The overall standard market looks to be stable and the standard lands market has yet to significantly regain loses realized in early April.  The current price of Copperline Gorge is below its counterparts in other colors yet sees similar tournament play.  All technical analysis indicates Copperline Gorge has hit a resistance point and is set to increase along with WSLands.  Because of these reasons my analysis has Copperline Gorge increasing to $4.00 over the next few months.

Example Copperline Gorge Tournament Decklists:

 

As always, I welcome your comments and feedback on whether you agree or disagree with my assessments and why.

Woof

12 Comments

I have no way of knowing how by Splendid Belt at Fri, 04/27/2012 - 09:24
Splendid Belt's picture
5

I have no way of knowing how accurate your analysis is, but I like the way you present it (both verbally and visually). Really interesting idea, and well explained. Already looking forward to the next instalment.

Thanks Splendid - I will have by thewoof2 at Fri, 04/27/2012 - 20:35
thewoof2's picture

Thanks Splendid - I will have to do an article revealing how my picks ended up in a few months to see if my analysis is accurate.

Really like the way this was by aberosh1819 at Fri, 04/27/2012 - 11:32
aberosh1819's picture
5

Really like the way this was structured, and frankly, would have been overjoyed to see additional individual evaluations (buy/sell/hold) on other members of the indices. This kind of article just gets my joy going.

Glad to hear you like the by thewoof2 at Fri, 04/27/2012 - 20:36
thewoof2's picture

Glad to hear you like the analysis. Just for you I might have my next article on some other index constituents! Let me think about it.

Very interesting approach and by Lepongemagique at Fri, 04/27/2012 - 16:31
Lepongemagique's picture

Very interesting approach and very nice article.
However, like Splendid Belt, I'm also not sure how accurate and/or reliable is the "WS30" and "WSL". And what it really represents or what it could be useful to?
Your same WS30 could be decreasing in value as a new set is release or some cards are banned, and new decks show up decreasing the value of half of the WS30 cards but introducing 10 news cards. In this case should you change the WS30 every 3 months? or enlarge it with, let say, the top 10 cards of each color (still in standard)?

Concerning the Copperline Gorge, unlike Gabriel Strasburg, this seems to me a very legitimate choice, since 2 known factors may positively influence the value of this card: 1)the release of Cavern of souls (and the massive return of ramp and titans (Red and Green especially) 2) the potential (even if likely not) ban of Delver of Secret or some components of the deck. At least for a limited time, RG ramp could be the next predominant deck.
Also, maybe you could be more specific in terms of investment time for the Gorge. To me the target time would be the first set of tournaments after AVR is legal, and/or after the next bans (in june?) beyond these points, and especially if you reach you 4$ target, you should consider sell the card. The release of M13 should also be a crucial point, if titans are not reprinted or if great R/G cards are newly printed you could revised your position on the Gorge. All to say that you have pretty well defined landmarks to decide to sell or not the Copperline Gorge. Just saying to keep them for "few months" may be a little bit too hazardous?

Good points and thanks for by thewoof2 at Fri, 04/27/2012 - 20:42
thewoof2's picture

Good points and thanks for the additional insight.

Regarding the accuracy of the index over time - it is my intention to keep them up to date with the latest. So WS30 will be "the top 30 tourney cards that show price movements in the standard format as a whole." If 10 new cards fit that description then I will remove the 10 that least do and add the 10 that more accurately do. To ensure the overall price of the index isn't affected by the changing of constituents I will modify the divisor to ensure price parity with any change. Hope that makes sense! The Dow does the same thing (only probably far less often)...

I totally agree with you on the timing item, and I will admit timing is a weak spot for me. So I love the fact that folks comment and help me with this. I will try to incorporate best I can in future articles but your comments are appreciated in helping further strategize on timing.

That 4/3 Devil is going to by KaraZorEl at Sat, 04/28/2012 - 15:35
KaraZorEl's picture

That 4/3 Devil is going to make Copperline Gorge and Blackcleave Cliffs more valuable. People are going to want to cast it on turn 1, so they might be running more Scars lands. I also think these lands have staying power in Modern.

I would not invest in by Untoward_Parable at Sun, 04/29/2012 - 13:39
Untoward_Parable's picture

I would not invest in copperline gorge unless you can buy at 2 tix or under, it moves from 2-3.5, people who think theyre good magic players will do everything they can not to play a deck that needs the land (except frites) and so it will never reach it's "natural" value based on the metagame. People don't want to pay full price for it so you have to be profiting when selling at half a tix under at least. I've made some good money off it buying at 1.5 and selling when you can drop it for 2.5+, rinse repeat, but dont expect it to go above 4 ever, and 4 is best case scenario. Its not a bad tool for generating income since it cant really get that low either and such is a safe investment when it bottoms.

The value of cards is based as much on perception of value as it is supply and demand, if it can go in a blue deck it will generally have higher value than the metagame suggests, if it can't it will be lower.

Risks by Matindo at Mon, 04/30/2012 - 03:51
Matindo's picture
5

Just another thing you might want to talk about in risks is how the scar lands rotate out when Return to Ravnica hits this means that a lot of people will be selling these things off at the end of this PTQ season.

So you really can't be holding onto these for too long unless you think they might become staple lands in Modern (which in that case, the end of the Standard PTQ season would be a great time to buy them).

I really enjoy these reports, thanks again.

I need to my research on set by thewoof2 at Tue, 05/01/2012 - 19:10
thewoof2's picture

I need to my research on set change dates and PTQ season type changes. One key item to research will be if there is any pattern seen before, at and after say the rotation occurs. Perhaps prices already have accounted for the rotation and won't be affected much at this early stage, I doubt it though... A future article will have to micro-analysis these large format changes and new card introductions to see if we can deduce their impact.

Thanks for bringing these up and glad you like my articles!

Woof I like what you do, but by walkerdog at Tue, 05/01/2012 - 20:06
walkerdog's picture

Woof I like what you do, but using the PTQ seasons (especially modern) and selling off standard cards the spring/summer they're going to rotate is just free money that's been basically covered. You can think of selling (most) about-to-rotate standard cards as short sales. If I sell my Blackcleaves this summer, then rebuy post-rotation, i'll have a few dollars + the cards.

The working poor are often by nobelboy at Fri, 07/13/2012 - 12:59
nobelboy's picture

The working poor are often distinguished from people that can’t pay what they are suppose to pay, poor who are supported by government aid or charity.
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