We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Price & Volume: The Anatomy of a True Market Leader
Price & Volume are Key Elements
Studies show that as much as 60% of the human body is comprised of hydrogen and oxygen (water). Said another way, without water, humans cannot survive very long. In the stock market, the elements that comprise a true market leader are strong price and volume trends. Without these two critical ingredients, a stock is unlikely to trend higher.
Monitoring price and volume (or supply and demand) is vital for an investor because it can provide valuable insights into the behavior of the general market and individual equities, such as clues of:
· Institutional Accumulation: When a stock shoots higher on expanding price and volume, it can be a clue that an institution is accumulating a position. For example, after its last earnings report, Nvidia ((NVDA - Free Report) ) gapped higher by 14% on volume 129% above the norm.
Image Source: Zacks Investment Research
Nvidia traded a mind-blowing 111 million shares in the session. Because such a large number of shares is impossible for retail investors to buy, the demand was indicative of institutional investors like mutual funds, banks, and pension funds. Remember, institutions move stocks, not retail.
· A Strong Pullback: As any experienced investor knows, no stock goes straight up. For this reason, investors can gain valuable information by monitoring how a stock pulls back. Shallow pullbacks on low volume are a sign of digestion, not downward conviction. Often, the strength of a stock is revealed in the pullback, not the advance. See Advanced Micro Devices ((AMD - Free Report) ) below:
Image Source: Zacks Investment Research
· Weak Rallies: When a stock moves higher on low volume, it should raise cautionary flags for investors. Rallies like this signify that while the stock is moving higher, conviction is low. A good recent example is Walker Dunlop ((WD - Free Report) ).
Image Source: Zacks Investment Research
Takeaway
Similar to how a doctor consoles an X-Ray for pertinent information, investors look to price and volume charts to reveal important patterns. Charts help investors to identify institutional accumulation from low conviction accumulation. Furthermore, they allow investors to separate strong pullbacks from weak ones. As the old saying goes, “a picture is worth a thousand words.”
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Price & Volume: The Anatomy of a True Market Leader
Price & Volume are Key Elements
Studies show that as much as 60% of the human body is comprised of hydrogen and oxygen (water). Said another way, without water, humans cannot survive very long. In the stock market, the elements that comprise a true market leader are strong price and volume trends. Without these two critical ingredients, a stock is unlikely to trend higher.
Monitoring price and volume (or supply and demand) is vital for an investor because it can provide valuable insights into the behavior of the general market and individual equities, such as clues of:
· Institutional Accumulation: When a stock shoots higher on expanding price and volume, it can be a clue that an institution is accumulating a position. For example, after its last earnings report, Nvidia ((NVDA - Free Report) ) gapped higher by 14% on volume 129% above the norm.
Image Source: Zacks Investment Research
Nvidia traded a mind-blowing 111 million shares in the session. Because such a large number of shares is impossible for retail investors to buy, the demand was indicative of institutional investors like mutual funds, banks, and pension funds. Remember, institutions move stocks, not retail.
· A Strong Pullback: As any experienced investor knows, no stock goes straight up. For this reason, investors can gain valuable information by monitoring how a stock pulls back. Shallow pullbacks on low volume are a sign of digestion, not downward conviction. Often, the strength of a stock is revealed in the pullback, not the advance. See Advanced Micro Devices ((AMD - Free Report) ) below:
Image Source: Zacks Investment Research
· Weak Rallies: When a stock moves higher on low volume, it should raise cautionary flags for investors. Rallies like this signify that while the stock is moving higher, conviction is low. A good recent example is Walker Dunlop ((WD - Free Report) ).
Image Source: Zacks Investment Research
Takeaway
Similar to how a doctor consoles an X-Ray for pertinent information, investors look to price and volume charts to reveal important patterns. Charts help investors to identify institutional accumulation from low conviction accumulation. Furthermore, they allow investors to separate strong pullbacks from weak ones. As the old saying goes, “a picture is worth a thousand words.”