This week in Momentum Monday I introduced a new section within the data table area called, “ Buses pulling out of the station”.
There is a common rule among many charting practitioners that a price rise accompanied by volume increases enhances the chances of price recovery.
To that end we have introduced a new table of stocks where we are trying to find companies who recently have experienced negative / flat sentiment, however now that may be changing due to an improvement in price AND volume. Stage analysis investor Stan Weinstein is quoted as saying,
“Volume is a gauge of how powerful the buyers are... Never trust a breakout that isn't accompanied by a significant increase in volume.”
The logic behind this quote is quite simple, simply a spike in volume when price is going up means that more traders are committed to entering the stock than leaving it. We can tell their committed because the price is going up at the same time.
Price going up = Each seller is having their offer price filled.
However, Price going up with increased volume = Each seller has their offer (sell price) filled and more buyers are willing to step up to take higher offers as there is a lack of volume lower down.
Coincidently, this phenomenon is flipped if the price is going down and volume is increasing. This pattern means sellers are strong in their conviction and are willing to accept a lower bid (buy) price as they are desperate to get out indicating something bad may be afoot.
The “Bus pulling out of the station” is an attempt to find stocks with bullish potential where the price had been flat of falling for a period, however more recently price has been rebounding (or at least positive)
What we are looking for are stocks that have been flatlining or falling, but price sentiment is changing and volume has supported that over the time period. While there is no specific screen for this in Stockopedia, what I have done for the list is use the screen function with the following criteria to help point us in the right direction to where these events may be occurring:
Absolute Price change 3mth less than or equal to 3
Absolute Price change 1mth greater…
