Page 479 - How to Make Money in Stocks Trilogy

How I Use IBD to Find Potential Winning Stocks 349

Volume Percent Change Tracks the Big Money Flow
Another important measurement IBD created is Volume Percent Change
(see the column labeled 6 on page 342). Most newspapers and information
providers on TV and the Web provide only a stock’s trading volume for the
day, which doesn’t tell the entire, meaningful story. Based on the volume
information they provide, how would you know whether the volume for all
the stocks in your portfolio and those you’re considering for purchase is nor-
mal, abnormally low, or abnormally high?
In order to know this, you’d have to keep in your head or on paper what
the average daily volume is for each stock under review. Instead, you can
rely on IBD to keep track of this key measure of supply and demand for you.
IBD was the first to provide investors with a Volume Percent Change mea-
sure that monitors what the normal daily trading level for every stock has
been over the most recent 50 trading days. It pays to always have the most
relevant facts, not just a bunch of numbers.
Stocks trade at many different volume levels, and any major change in
volume can give you extremely significant clues. One stock may trade an
average of 10,000 shares a day, while another trades 200,000 shares a day,
and still another trades 5 million shares a day. The key is not how many
shares were traded, but whether a particular day’s volume activity is or is not
unusually above or below average. For example, if a stock with an average
trading volume of 10,000 shares suddenly trades 70,000 shares, while its
price jumps one point, the stock has increased in price on a 600% increase
in volume—generally a positive sign as long as other market and fundamen-
tal measurements are constructive.
If this happens, the Volume Percent Change column will show a +600%,
which quickly alerts you to possible emerging professional interest in the
stock. (In this case, the stock is trading 600% above its normal volume, and
if the price is up substantially all of a sudden; this can be a major tip-off.)
Volume Percent Change is like having a computer in your pocket to care-
fully monitor the changing supply and demand for every single stock.
Where else can you get such preeminently critical data?
Almost all daily newspapers have cut out essential information in their
stock tables. This includes the Wall Street Journal, which no longer even
shows a stock’s trading volume in its daily stock tables.
Volume Percent Change is one of the main reasons so many specialists on the
floor of the New York Stock Exchange, professional portfolio managers, top-
producing stockbrokers, and savvy individual investors use and refer to IBD’s
stock tables. There is no better way to track the flow of money into and out of
companies, if you know how to utilize these data. If price is all you look at when
you check your stocks, you’re like a piano player who plays with only one hand,