Trading Volume Should Soar When The Stock Does

Trading Volume Should Soar When The Stock Does
News from Investor’s Business Daily:

Let volume be your guide. That’s been a constant refrain in IBD’s articles for years and years.

Here’s the idea behind it: Big volume indicates anxious buying or selling by institutions or other big investors. It’s these heavyweights who have the power to really move a stock to new heights or send it tumbling.

But what exactly does it mean to have big volume? It refers to many more shares changing hands than normal.

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Look at the average daily volume for the stock that you’re studying, then see if the current session’s turnover is much higher than average. To get the average level, IBD and its sister company MarketSmith generally use a 50-day moving average.

On the breakout, you prefer to see trade that’s at least 40% above the average over the past 50 days. On a weekly basis, you would like to see higher turnover for the breakout week than during the prior week.

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