When evaluating stocks on your watch list, there's one word you need to know: .
Volume — the number of shares traded — tells you whether mutual funds, pension funds and other deep-pocketed investors are buying or selling with passion. That's important because those institutions have the power to send a stock soaring to the sky, or plunging into the abyss.
You want to buy stocks that are breaking out above buy points in volume that's at least 40% above normal. That's a sure sign of institutional support. But a stock that breaks out in lower volume is suspect. And a stock that falls in heavy volume may signal that big funds are bailing out.
IBD tracks the volume movements of each stock everyday. "The Stocks On The Move" table, located in the Making Money section of IBD and on the home page at Investors.com, flags stocks that are moving in unusually heavy turnover.
"You don't want to miss this screen if you are searching for emerging leaders," wrote IBD founder William J. O'Neil in his best-selling book, ".
He added: "It's a good way to spot the of a stock as it is happening or shortly thereafter.
Stocks on The Move can help you find stocks breaking out of bases or clearing secondary buy points, and point you to ones under accumulation.
To make the table, stocks must be priced $20 or higher for the NYSE and $16 or higher for the Nasdaq. Stocks must have a of at least plus or minus 50 cents. And a stock's 50-day average volume must be above 60,000 shares.
The criteria for stocks rising in price get more restrictive. They must have and Relative Price Strength Ratings of at least 70 and their Accumulation-Distribution Ratings must be D+ or higher. Last, a stock's next-year EPS estimate must be 15% or higher than its prior year's earnings.
Stocks with EPS and RS Ratings of 80 or higher as well as being up in price for the day are boldfaced so you can quickly identify the market's best stocks.
Celgene (CELG) appeared in the IBD website's Stocks On the Move table on Dec. 11, 2012 — the same day it broke out of a with an 81.34 . Volume was 121% above average that day, and the stock has gone on to rise more than 40%.
Celgene had also appeared in Stocks On The Move on Dec. 5, giving investors a chance to add it to their watch lists while the biotech was still building its base.
Not all stocks on this screen will go on to be winners. It's important to check a stock's chart pattern and that its ratings show leadership potential. Celgene enjoyed Composite and EPS scores of 98 on breakout day. The RS Rating was 82 and the Accumulation-Distribution Rating B-, indicating positive demand for shares.