(Source: Business Wire)
Kevin Matras writes about increasing weekly volumes to judge real demand for stocks. Stocks in this week's article include NIC, Inc. (NASDAQ: EGOV), FormFactor, Inc. (NASDAQ: FORM), MDC Holdings, Inc. (NYSE: MDC), Marten Transport, Ltd. (NASDAQ: MRTN) and The Travelers Companies, Inc. (NYSE: TRV). Click here for the full story exclusively on Zacks.com: http://at.zacks.com/?id=109
Screen of the Week written by Kevin Matras of Zacks Investment Research:
The rally in the major indexes over the last 3 weeks has been quite inspiring and has provided the most recent ray of hope that we could be getting closer to coming out of this mess.
However, I've noticed that the last half of this 20+% rally was made on declining volume. Not only does this show up on the major indexes, but on lots of individual stocks as well. And while the volumes for the indexes were mostly above average to average, just the mere fact that volume was dropping at all during this run-up suggests a lack of conviction and supportive demand.
But volume indeed was downright light on plenty of individual stocks. It may also explain the weakening of the rally late last week and early this week. And while I still believe there's more to be seen on the upside, a jump in volume will make me feel all the better about it.
The whole idea behind wanting to see increased volume is because price should follow volume. If a stock is rising on increasing volume, it can be a sign that new buyers are coming in and some short sellers may be giving up. (I'm sure we saw a lot of that at the beginning.) But rising prices on decreasing volume suggests a lack of new buyers and waning underlying pressure.
Just as a ball on top of a hose needs more and more water pressure to push it higher; the same is true to an extent in the markets. Once you let up on that water pressure, the ball will fall back down. And when buying demand eases up, so too will the market.
So in this week's screen I'm searching for stocks with increasing volume over the last couple of weeks. Not just a couple of days, but weeks. This helps me see true demand that seems to be building over time. There may be an occasional light day here and there, but in total, I want to see it growing week by week.
And while there are plenty of stocks that fail to meet this criteria, there are lots of really great stocks that do.
The parameters to the screen I'm running this week are as follows:
* Price greater than or equal to $5
* Volume (avg.
