Volume is a big word when finding the next surge stock.
I can find plenty of stocks that have soaring sales and other fundamentals.
And I can take that list and winnow it to find stocks with price action that fits my additional criteria, including being above my requisite moving price averages.
But in each issue of Traders Daily Direction, we post volume leaders of note from the prior trading day.
These may not make the cut of the SSI, but it shows that volume is a very important thing to be aware of when finding surge stocks.
But what really gets a stock over the top of my working list of potential surge stocks is a major building of volume.
In a moment, I’ll explain why volume is such an important component of the research that is done for the stocks utilizing my Stock Surge Indicator (SSI) system.
The SSI takes market trading data from thousands of stocks and identifies stocks with the top scores.
These are then further winnowed for the best stocks that we can present to you each and every week inside Traders Daily Direction.
And for those of you that have recently joined us here at Traders Daily Direction, I strongly recommend making sure that you are up to speed on my SSI system.
You don’t need to know the math or to do the calculations – but you do need to understand how it works and why.
This will empower you to be able to buy into the surge stocks with more confidence.
To get up to speed on my SSI – please download for free and read my special report: The Magic of the Stock Surge Indicator.
Now, on to my explanation of the power of volume.
Confirmation Is Key
I’m looking for stocks that are beginning a new surge.
So, I don’t buy until price confirms that a new breakout is underway.
This usually means making a new high and getting above previous resistance.
But price isn’t the only tool I use for confirmation.
As noted above, I also watch volume.
A true breakout surge will be accompanied by an increase in trading volume.
This shows me that demand has increased, and institutions are buying in large size.
I like to see at least twice the average daily volume on a breakout – preferably 5X or more.
The same goes for the follow-through.
The stock should experience several days of heavy buying if it is going to make a large move.
A First Example
This is First Advantage (FA) – a recent IPO that broke out from its initial base last week.
Notice the large spike in volume on the daily chart.
FA saw roughly 100,000 shares traded each day preceding the breakout, then 1.5 million on the move to new highs.
This is the sign of a strong move.
A Second Class-A Example
I put Albemarle (ALB) on the Traders Daily Direction Watchlist back in July after noticing a textbook “cup and handle” pattern forming.
Look at that volume surge – 4X its daily average.
ALB climbed 35.2% over the next 30 days.
A Third Upstart of an Example
Upstart Holdings (UPST) was a big mover last week after reporting blowout earnings.
Note the drop in volume during the consolidation phase – a sign that selling had dried up and very little supply was coming to market.
Then, a massive surge in trading volume led to a 50% jump in the stock.
The easiest way to make money in stocks is to follow the money.
Institutions have deep pockets. When they buy, prices go up.
Don’t overthink it.
Ride the surge up, then nail down some profits and go back to cash.
Volume rules when looking to confirm the next surge stock.