A stock that has unusual volume and move in a relatively tight range often points to accumulation by investors. Stocks like this can go up dramatically in a few months time.
When a stock move sideways in a tight range after unusual volume, it shows that the stock is being accumulated by the smart money. There will be a first burst of volume and then everything seems to dry up.
There might be no heavy volume or wild price movement in a few weeks to a few months. And then all of a sudden, there will be a big shoot up in the stock accompanied by increasing volume. Finding these kind of stocks takes a lot of patience but the huge move upwards can be very rewarding. This is where 10 baggers can be found.
A stock that is under accumulation display a certain type of pattern that is easy to see. You will be able to spot the similarity in the stock charts below.
In the chart above, you can see CMA had an unusual volume in mid August. This stock moved sideways in a trading range for a while. Then all of a sudden, the stock suddenly shoots up rapidly. While a stock is trading sideways it is slowly being accumulated by the smart money. The first sign of accumulation is a burst of unusual volume. Despite the burst of volume, the stock trades sideways.
Big institutions have their own way of not tipping their hand. They make sure the price does not go too high and neither will they let if fall too low. They want to accumulate the shares quietly. Occasionally you see a slightly heavier than normal volume as the stock trades sideways. This is due to others in the industry also jumping in. When the stock is ready to explode, trend traders and momentum trades also jump in. As the stock rises, you will usually see many heavy volume days as these traders jump in.
In the chart above, you can see how BRKS had a first burst of volume in mid November. The stock traded sideways and it had two days of unusual volume. Someone was secretly accumulating the shares without wanting to move the price too much. Eventually the stock exploded higher.
In the chart above, you can see BSBR had some heavy volume in early March. Then, it traded sideways and had a huge unusual volume. This showed us there were some smart money loading on the stock into their account. You can see how this stock gradually grinded higher over the months. Eventually the stock more than doubled in price.
In the chart of BZUN above, you can see the stock had many above average volume days as it traded sideways. This pointed out to us that this stock was under accumulation. As the stock rose, there were more and more unusual volume days which told us more people were piling into the stock. Look how the stock tripled in price.
AAOI is another stock that showed great performance after an unusual volume occured in August. The stock trade sideways awhile then gap higher on another unusual volume day. It gap up again in early September on unusual volume and traded sideways again. This stock had all the signs of being accumulated by the smart money. AAOI quadrupled in price!
KEM is another stock that rewarded the patient investor. The stock first showed a sign of being accumulated when it had an unusual volume day in mid July. The stock traded higher and then moved sideways for a few months. During these few months, the volume was very quiet.
That means there were not many people who were selling this stock. The smart money were holding the stock in anticipation of higher prices. Then in November, the stock started to run higher on heavy volume. Trend and momentum traders were joining in the fun. The stock reach $11.00. An incredible return by many standards!
Mar 23, 21 08:25 AM
This week let us take a look at the SPX and TSLA. See what we can learn from their charts.
Mar 19, 21 05:24 AM
In this week we will have a look at Bitcoin, ETN and MAT, SPX and QQQ and see what we can learn from its chart.
Mar 09, 21 08:33 AM
In this week's lesson, let's take a look at bitcoin and makita.
Mar 03, 21 09:48 AM
In this week we will take a look at BRX and KIM and see what we can learn from the charts.
Feb 25, 21 07:54 AM
In this week we will have a look at VUZI, KSS, PBCT, CBRE, SPG, KPOWER and the lessons from their chart.