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Using Price and Volume for Picking Winning Stocks

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With the market gyrating up and down lately, it can be difficult to determine which stocks are poised to move higher and which ones are just marking time before heading lower.

One of the best ways to determine this is to look at the volume; specifically, how the price and volume move together.

I mention this because price typically follows volume.

And if your stocks are falling on an increase in volume, that suggests more sellers and maybe a set up for a larger correction.

Moreover, if the subsequent up days are made on lower volume than on the down days, that's additional foreshadowing that maybe the stocks are running out of buyers and will soon be headed back down.

And that's why in this week's screen I want to focus on stocks with increasing Price and Volume.

Once again, price should follow volume.

If a stock is rising on increasing volume, it can be a sign that new buyers are coming in and some short sellers may be giving up.

One of the reasons why I like to look at increasing volume is because it's one of the best ways to spot institutional buying. This is important because regular, everyday investors do not have the power to move the market or to make a noticeable blip on the volume's bar chart. But big institutional traders do. And nothing can move a market more than seeing these guys pile in.

Plus, since big institutions can typically take weeks if not months to build a position, once institutional buying is spotted, it shows that the market could be getting ready for a big increase.

When you hear someone say the market was up or down on big volume, that's more than just an interesting fact. To the technically savvy, that can act as a clue to investor sentiment and a chance to get in and ride the wave while the big guys are getting in.

So in this week's screen I'm searching for stocks with increasing volume over the last couple of weeks. Not just a couple of days, but weeks.

This helps me see true demand that seems to be building over time. There may be an occasional light day here and there, but in total, I want to see it growing week by week.

And while there are plenty of stocks that fail to meet these criteria right now, there are lots of really great stocks that do, and those are the ones we're concentrating on.

The parameters to the screen I'm running this week are as follows:

  • Price greater than or equal to $5
  • Volume (avg. 20 day) greater than or equal to 100,000
  • Zacks Rank less than or equal to 3
  • Projected 12 month EPS Growth Rate greater than 0

  • Recent Week's Price greater than Price from 1 Week Ago
  • Price from 1 Week Ago greater than Price from 2 Weeks Ago

  • Weekly Volume greater than Weekly Volume from 1 Week Ago
  • Weekly Volume from 1 Week Ago greater than Weekly Volume from 2 Weeks Ago.

You can also add in a third week to narrow down a crowded list. For this week's screen, we'll keep it at two.

Here are 5 stocks that made it thru this week's screen:

(LAD - Free Report) Lithia Motors Inc.
(NCR - Free Report) NCR Corp.
(TDG - Free Report) TransDigm Group Inc.
(AME - Free Report) AMETEK, Inc.
(HOG - Free Report) Harley-Davidson, Inc.

Get the rest of the stocks on this list and start screening for these companies on your own.

And be sure to check your own stocks to see if their price and volume are moving in the same direction. If not, you might want to take a closer look at them. Sign up now to the Research Wizard and see how to do it and become a better stock picker today!

Sign up now for your 2 week free trial to the Research Wizard.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at:

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