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Volume
+ Moving Average (“MA”)
Volume, one of the most widely used methods of
measuring investor sentiment for a stock, represents the number of shares
exchanged in a given period. The buying and selling of one share equals one
unit of volume.
A moving average line is used as a benchmark
comparison to gauge the activity and money flow in a stock. The MA statistic
smoothes the fluctuations that are inherent in volume data, making the
direction of volume visible and thus useful to investors. Yahoo uses a
13-day EMA overlay on their technical analysis screens.
Below is a diagram of volume with a MA overlay; Corning
is used as an example:
Reproduced with
permission of Yahoo! Inc.
ã 2004 by
Yahoo! Inc.
YAHOO! and the YAHOO! logo are trademarks of Yahoo! Inc.
High activity in a stock, when compared to its MA,
will usually affect the company’s stock price. Normally, when volume and
prices are high, the market is bullish on the company. Conversely, when
volume and prices are low, the market is cautious and bearish on the
company.
High volume is also an indication of where the
professional and institutional money is active.
Volume statistics have been reported in newspapers as
long as I can remember. When compared with the stock price, volume is an
excellent easy-to-use gauge of sentiment, and on the price direction of a
security.
Click below for more information on oscillators:
Rate of Change
Relative Strength Index
MACD
Price Oscillator
Stochastic
Money Flow Index
Williams %R
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