Chicago, IL – October 6, 2009- Kevin Matras writes about how to use weekly price and volume to help determine future market direction. Highlighted stocks in this week’s article include AXIS Capital Holdings Ltd. (NYSE: AXS), AZZ incorporated (NYSE: AZZ), Check Point Software Technologies Ltd. (NASDAQ: CHKP), Ennis, Inc. (NYSE: EBF) and Net Servicos de Comunicacao S.A. (NASDAQ: NETC). Click here for the full story exclusively on Zacks.com: http://at.zacks.com/?id=5528.
Screen of the Week written by Kevin Matras of Zacks Investment Research:
With the market and plenty of stocks hitting a rough patch over the last two weeks (although the market is doing a good job of trying to redeem itself so far this week), I’ve noticed that the pullback came on a noticeable increase in volume.
I mention this because price typically follows volume.
And if your stocks are falling on an increase in volume, that suggests selling, and maybe a set up for a larger correction.
Moreover, if the subsequent up days are made on lower volume than the down days, that’s additional foreshadowing that stocks might need to take a breather and find new ‘lower’ ground.
And that’s why I want to focus on stocks with increasing Price and Volume in this week’s screen.
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.
But rising prices on decreasing volume suggests a lack of new buyers and waning underlying pressure.
Just like a ball on top of a hose needs more and more water pressure to push it higher, the same is true to an extent in the markets.
Once you let up on that water pressure, the ball will fall back down. And when buying demand eases up, so too will the market.
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, there are lots of really great stocks that do.
The parameters to the screen I’m running this week are as follows:
- Price >= $5
- Volume (avg. 20 day) >= 100,000
- Zacks Rank less than or equal to 3
- Projected 12 month Growth Rate >0
- Recent Week’s Price > Price from 1 Week Ago
- Price from 1 Week Ago >Price from 2 Weeks Ago
- Weekly Volume > Weekly Volume from 1 Week Ago
- Weekly Volume from 1 Week Ago >Weekly Volume from 2 Weeks Ago
For those using the Research Wizard, here’s what the Price and Volume parameters look like. (The Price components (i6) and Volume components (i7) were done using the DBWP – Historical Weekly Prices database.)
Here are 5 stocks that made it thru this week’s screen for 10/5/09:
AXS AXIS Capital Holdings Ltd.
AZZ AZZ incorporated
CHKP Check Point Software Technologies Ltd.
EBF Ennis, Inc.
NETC Net Servicos de Comunicacao S.A.
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 for your free trial to the Research Wizard and and become a better stock picker today: http://at.zacks.com/?id=5529.
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.
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