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Is
a stock on our lists suddenly getting a new lease on life?
Our
VMI indicator can provide valuable clues.
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Developed
by CallWriter, the VMI is a volume
momentum indicator for the underlying
stock - appearing on CallWriter's Real-Time Lists™
next to average trading volume - that provides
a graphic indicator of a recent surge or sag in
volume, if any, and its strength.
While
the average daily trading volume is important
in and of itself as an indicator of liquidity,
volume spikes often provide early
warning of reversals, which is the
main purpose of the VMI. This is shown clearly
on the SOHU.com chart below.
The
VMI volume momentum indicator has been
carefully constructed to give members an instant
indication of whether stock volumes over the last
5 trading days have been close to the
daily average (horizontal arrow),
higher than normal (green
up arrow) or lower than normal
(down arrow), together with the strength
of momentum - indicated by the height of the up
or down arrows.
Day
Weighting and Comparison
The
VMI compares the average weighted volume for the
previous five (5) days of trading against the
unweighted 65-day volume average.
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Each
of the previous 5 trading days is assigned
a different weight, and the total volume
thus obtained is divided by 15 to get the
weighted volume.
The
weighted volume is then compared against
the 65-day volume average. The VMI expresses
this relationship. |
VMI
- Indicator Arrows
The
VMI graphic is an arrow,
designed to allow instant visual identification
of whether the volume trend over the last five
trading days has been rising, falling
or is essentially flat, and the height
of the up and down arrows indicates the strength
of the signal.
When
a stock makes a swing high or low - really, any
time the stock makes a meaningful test of a support
or resistance level - volume provides the real
evidence as to the strength of the test.
Lower-than-normal and flat recent volume really
tells us nothing. In scanning the list, we are
looking for a volume surge that may indicate a
possible reversal.
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Higher
Volume:
When
the 5-day weighted average volume is 6%
or more higher than
the 65-day average, the list will present an
UP arrow. The number of green bars comprising
the arrow graphic (1 to 5 bars) indicate the
relative strength of the volume surge.
The
larger the arrow, the more likely the stock
is forming a volume spike now, so 3 to 5 green
bars may mean the stock is in the middle of
a reversal, or at least a bull-bear shootout. |
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Lower
Volume:
When
the 5-day weighted average volume is 6%
or more below
the 65-day average, the list will
present a a DOWN arrow. The number of orange
bars comprising the arrow graphic (1 to 5 bars)
indicate the degree that volume was below
normal.
A
down arrow with 1 or 2 bars can mean that volume
has been sluggish, but can also signal that
the stock recently reversed - and volume is
low after the climax. |
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Flat
Volume:
The
flat (sideways) arrow indicates that the 5-day
weighted volume is within ± 6% of the
65-day volume average. There is no volume momentum.
But as with low volume, this can signal that
a reversal has just occurred. |
| Note:
The VMI indicator arrows only indicate
the level of recent volume and bear
no relation to stock price. Thus
a down arrow indicates only that recent volume
has been lower than usual; an up arrow indicates
only it has been higher than usual. And a sideways
arrow only indicates relatively flat volume, not
a flat stock price. |
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