One of the best ways to find stocks on the move that are
grabbing investors' attention is to screen for stocks with
increasing volume.
This is because increased volume shows investor interest. As more
investors buy the stock, that stock's price should go higher.
But the individual investor, while important to the market, doesn't
really have the firepower to affect volume the way that big
institutional investors do.
And very few things can move a stock more than institutional
buying.
Why is that?
For one, institutions have the ability of buying tens of millions
of dollars worth of a stock and even hundreds of millions of
dollars. And because their purchases are often so large, it
typically takes weeks, if not months, for an institutional investor
to build a position.
Given this commitment, considering it will also take several weeks
or months to get out, you can be sure that these institutional
investors have done plenty of homework to feel good about the
fundamental prospects of the company.
This does not mean you can ignore your own analysis or the stock
market as a whole. But screening for stocks with rising volume
(along with prices of course) can put some fantastic stocks on your
radar screen.
What Kind of Volume Increase to Look For
I prefer to search for at least two weeks of increasing volume
along with rising prices. And in my testing I have found that 3
weeks performs even better.
One week volume spikes, however, will not get thru as oftentimes
those can be driven by one day events. Instead, it's the successive
volume increase, which shows true buying demand, that gives this
set-up its value.
The volume increase also doesn't have to be huge. We're not talking
about a several hundred percent increase. In fact, often those
massive increases prove to be turning points.
What we're looking for are noticeable increases, like 10%, 20% or
50% increases, etc. But nothing outrageous, like a 10 fold
increase. Remember, the last thing an institutional investor wants
to do is call too much attention to himself, while he or she is in
the midst of building a position. But if you know what to look for,
you can see all of this happening in plain site. And get in for the
ride as they flesh out the rest of their position.
Screen Parameters
- Current Price greater than Price from 1 Week Ago
- Price from 1 Week Ago greater than Price from 2 Weeks Ago
- Price from 2 Week Ago greater than Price from 3 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
- Weekly Volume from 2 Week Ago greater than Weekly Volume from
3 Weeks Ago
- Zacks Rank less than or equal to 3
- Price greater than or equal to $5
- Average 20-day Volume greater than or equal to 100,000
shares
The most important elements to this screen are the price and volume
items (especially the volume). The Zacks Rank also helps to make
sure that their earnings estimates are on the rise. The price item
however is a personal preference as I generally don't buy stocks
under $5. But it should also be noted that many institutions won't
either. But if you're looking for lower priced stocks, you can of
course remove this item. And lastly, the average volume item
ensures there's enough trade activity on a daily basis to get in
and out of the market easily.
Stocks
Here are 5 stocks that passed this week's screen:
AUTH
AuthenTec, Inc.
BGS
B&G Foods, Inc.
MRLN
Marlin Business Services Corp.
SLM
SLM Corporation
STAN
Standard Parking Corp.
All of these stocks look good fundamentally. But their successive
increases in weekly volume suggest institutional buying and warrant
an even closer look.
Get the rest of the stocks on this list and start screening for
weekly volume increases to uncover institutional buying on your
own. It's easy to do.
Click here to sign up for a free trial to the
Research Wizard today.
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:
http://www.zacks.com/performance
.
AUTHENTEC INC (AUTH): Free Stock Analysis
Report
B&G FOODS CL-A (BGS): Free Stock Analysis
Report
MARLIN BUS SVCS (MRLN): Free Stock Analysis
Report
SLM CORP (SLM): Free Stock Analysis Report
STANDARD PKG CP (STAN): Free Stock Analysis
Report
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