by Alex Martin

In this newsletter we will explore volume studies and percent held by institutions. For a closer look at volume, see ChartFilter Newsletter #7.

Step 1: Limiting the Exchanges.

For this example we will concentrate the search on TSE, NYSE, AMEX and NASDAQ.

Technical Indicators

A little on volume: Volume is an important part of the analysis of charts and price positions. Large trading volumes suggests liquidity which gives the investor the ability to easily enter or exit the market. Certain chart formations also require large volumes for the pattern to succesfully develop. Charts with low volume generate seemingly large price jumps and may tempt traders, but low volume stocks are difficult to exit.

Volume Indicators that use trends (or convergance/divergances) as their signals

PVT - Price Volume Trend
The main signal offered by the PVT indicator is divergence from price, which can not be screened. It is, however, an important tool when charting with volume and should be well studied well to determine if it fits with your trading style.

OBV - On Balanced Volume
On Balance Volume can be used to either confirm the current price trend or warn of a possible reversal. It is the trend of the OBV line that is important, not the actual numbers themselves. OBV is a momentum indicator that helps quantify buying or selling pressure. OBV changes often precede price changes. OBV is very similar to PVT, where trend analysis is the key to success. Since trend are the key signals, it is not a filterable indicator, but should be studied when analysing the price chart.

VAO - Volume Acccumulation Oscillator
The VAO is most valuable when: in an overbought/sold position, prices reach a new high or low and the oscillator fails to exceed its previous high/low reading and then reverses direction.

Buy or sell signals are considered reliable only when they are in keeping with the overall (long-term) trend. A buy signal would be generated if an up-trending market is above its intermediate (100-day) moving average, and a negative VAO turns upwards (from a trough). A sell signal would be generated if a stock is below its 100-day moving average and a positive VAO turns downwards (from a peak).

Since all three indicators use trend divergance/convergances to determine potential price movements, their signals are not easily screened due to the "human" component to determining trends, which is required for each screened.

Volume indicators with defined buy/sell points that we will filter with:

Step 2: Technical Indicator 1: Money Flow,

The Money Flow Index (MFI) tracks the flow of money into or out of a market. Price typically follows MFI and will eventually move in the same direction.

MFI offers the following types of signals:

Choose technical 1, money flow, buy, within the last 10 days.

Step 3: Technical Indicator 2: Demand Index,

Demand Index incorporates price and volume to give a ratio of buying pressure to selling pressure.

DI offers the following types of signals:

• Divergences between DI and price. A divergence between the DI and prices suggests an approaching change in the price trend.
• Trendline analysis of DI showing levels of support/resistance can help determine changes in trend. As a leading indicator DI trendlines are often broken ahead of price trendlines.
• Zero-line crossings can confirm previous signals as a lagging indicator.

Choose technical 2, demand index, buy, within the last 10 days

Fundamental, Percent Held by Institutions

Step 4: Fundamental Indicator 1: Percent Held by Institutions,

Institutional investors are covered by fewer protective regulations because it is assumed that they are more knowledgeable and better able to protect themselves.

In this screen we will be choosing stocks that have between 1-20% of their stocks held by institutions.

Step 5: Click search and view results

These are the results of the search.

Click on graphic to enlarge

As we can see, there are several stocks that have generated both an MFI and DI buy on the same day. These would be the first stocks to analyze further.

For more example stock screens/indicators, see the ChartFilter stock screener Instructions or the archived newsletter section.

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When screening for stocks, it is important to experiment until you have found the winning combination.

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