The lack of trading volume has been a common knock on the market, making any and every rally difficult to trust. But this is a market of stocks, and volume must be showing up somewhere, right?
I decided to run a few scans to track down what stocks have really captured the market’s interest in the past five days. These past five days are important because the S&P 500 confirmed its breakout from resistance, albeit on poor volume and without the participation of the financials. I maintain a base list of 3426 stocks that exclude stocks trading under $4.74 or trading under 48,000 in average daily volume over the past 90 days. This list includes some ETFs and indices. I ran filters on this base list to understand what is going on with volume at the level of individual stocks.
My first filter extracted all stocks that ended the week on 5-day average volume higher than the average volume from the previous 90 days (covering most of the summer). Only 1009 of 3426 (33%) stocks satisfied this simple criteria. Next, I gradually tightened the criteria to see how fast the surviving list shrinks. Here are the results:
- 751 (22%) stocks also ended the week higher in price.
- 520 (15%) also ended the week higher in price and are trading above their respective 50-day moving averages (DMAs) and 200 DMAs.
- 462 (13%) also ended the week higher in price, are trading above their respective 50D and 200 DMAs, and are up for the year.
I next looked at how fast the list thins out when increasing just the volume criteria. I started with the 751 stocks that also ended the week higher in price to avoid picking up stocks that are selling off on high volume. The criteria get more strict as you read down the list.
- 485 stocks had average trading volume in the past 5 days that is over 15% of the average trading volume from the previous 90 days.
- 367 had average trading volume in the past 5 days that is over 25% of the average trading volume from the previous 90 days.
- 285 were over 35%…
- 238 were over 45%…
- 98 were over 100%…
So, only a minority of stocks have managed to achieve volumes exceeding their average summer volumes. Moreover, a very small fraction have both attracted incremental or significant interest from the market and are in good technical trading position relative to price.
From these scans I created two watchlists of stocks after plucking out ETFs, indices, stocks that achieved the entire volume surge in one day, and stocks that were acquired last week:
- 64 stocks where average volume increased in the past week, prices increased, and the stock is 8% or less above its 200 DMA. The 200DMA is also above the 50DMA. These are stocks that are just breaking out and may provide a better risk/reward for “chasing” this rally if you so dare. This list is labeled “Breaking Out.”
- 45 stocks where average volume doubled in the past week, prices increased, and the stock is trading above its 50 and 200DMAs. This list is dominated by stocks in very strong uptrends where price action also surged last week. This list is labeled “Biggest Surge in Volume.”
Click here for a version in html, click here for a version in PDF.
Enjoy but be careful out there!
Full disclosure: from the attached lists I am long NICE