High Volume with low price gain?

[Captain G]

Hi All, can people help explain to me what's the reason behind and/ or the possible effect on the future SP of a stock when you see a very high turn over, with a very little price gain ?? What does it mean or is leading too?? Eg. OXR, 2 days ago had a Volume of about 18 mill, with only a 0.38% price gain.
Cheers, Capt.

 

[coyotte]

Re: High Volume with low price gain ?

If you are referring to yesterday 16/8 ---- @ the close OXR had traded around 15 mill, slightly above the previouse two days 14.5 mill (commsec)

As OXR was sitting on it's previouse close it could have been CFD Providers covering their positions after hours --- if they where hedging then the prices would not vary that much ---- there was also a " U " order in (buy)for 2.64 near the close -- but as as usuall was pulled in the last minute

 

[kaveman]

Re: High Volume with low price gain ?

Could be a cross trade or other special trade by brokers or special issue of shares for some reason. Check announcements for any notice of issue of shares.

 

[CanOz]

High volume and thin price speads could indicate too much selling pressure for prices to move higher. If the smart money wants to remove supply from the market they must first remove the sellers right?

Someone jump in and correct me if i'm wrong.

 

[RobinHood]

high volume low price game typically = churning.

churning = selling by smart institutions
you can see this in stocks and indexes all the time

 

[Captain G]

Hi Robinhood, what is the advantage gained in churning by these smart institutions??
Cheers, Capt.

 

[RobinHood]

They sell when they have the opportuinty. It is better to sell stock into a willing market then on one causing price breaks.

 

[barney]

They sell when they have the opportuinty. It is better to sell stock into a willing market then on one causing price breaks.

Thread a few days old but I am curious for your opinion.........I see your point re selling into willing markets.......makes good sense.......Just wondering; If they, (the insto's) are feeling it neccessary to sell at that point in time, would you consider that they may perceive that a little further down the track, that the sp may be due for a bit of a downturn........My reasoning being that if they did not forsee a sp downturn why are they selling large volumes in the first place?? ie If they simply took the shares off the market wouldnt the price be inclined to rise a little anyway due to buying demand/then they could get a higher sp at a later date? Surely the big Co.'s dont sell just for the sake of it (then again what do I know!)

So I guess what I am asking is:- (youd think I should know what I am asking but I get confused easily ) Do you think that this large volume/low % margin selling is an indicator that the sp is going to drop in the short to medium term?..........just a theory....any thoughts.....(guess this is a theory that could be back tested for validity as well.) Cheers

 

[BAM]

I am certainly no expert on the subject……..yet, but I’ve read that different sectors experience different levels of growth that are independent of volume traded.
Typically, sectors like utilities for example are slow growers despite the millions of shares traded every day.
I think that many other external influences to a company and an industry affect the price movements more so than volume traded.
Any thoughts?

 

[Nick Radge]

A tight range on ultra high volume means the smart money are fading the trend. If the trend has been up the pattern means sellers. It tends to come after a positive announcement or news. The smart money knew about the news and is why they were long in the first place. They need volume to unload their positions and that volume appears from the announcement by the latecomers. It does not suggest prices will drop, but they certainly cannot go up until the smart money has been fulfilled or they believe they can get a better price. The reverse is true at times of capitulation.

Here is a recent example that I highlighted in an ATAA journal article. Note the prior two days that moved higher on very light volume. Not much buying power there. Now note the 3rd day back. Prices attempted to push higher, closed on their lows and did so on very high volume. Sellers were already unloading positions.

 

[barney]

A tight range on ultra high volume means the smart money are fading the trend. If the trend has been up the pattern means sellers. It tends to come after a positive announcement or news. The smart money knew about the news and is why they were long in the first place. They need volume to unload their positions and that volume appears from the announcement by the latecomers. It does not suggest prices will drop, but they certainly cannot go up until the smart money has been fulfilled or they believe they can get a better price. The reverse is true at times of capitulation.

Thanks for that description nick....it makes perfect sense.....Just out of curiousity what would be the definition of "smart money"? Is it simply the big instos etc who are backing their analysis of a given stock by accumulating, or are they privvy to information that us "little guys" don't get until it is common knowledge, and, if they are privvy to info, is there much difference between that, and "insider trading"? (not that I would suggest any large organisations would ever do anything "naughty" !! )

 

[Nick Radge]

Barney,
My definition:

A group of professional users that act in unison at very specific levels and points of time to change the order of supply and demand.

 

[barney]

Barney,
My definition:

A group of professional users that act in unison at very specific levels and points of time to change the order of supply and demand.

Thanks Nick. I guess that the "big players" basically drive/manipulate (to a large degree) the market, so from a "little players" point of view, the more we can read the "signs" of what they are "up to", the more chance we have of being successful?? Could this mean, that often, all the greatest analysis in the world may "fall over" simply because the big guys have decided to put their money elswhere? (I have a friend who used to work on the futures exchange years ago.....he said it was not uncommon for "the boys" (whoever they were) to talk about "working" a particular stock over on the day chosen........and my question in relation to all this..........Are there any obvious early "signals" that the novice trader (me as a good eg. ) can rely on to help pick these signals
PS I also guess that I am talking about more "short term" (trading) as opposed to investing (where analysis may still prove correct in the longer term)
Sorry if these remarks seem a bit "uneducated" ....still learning....

PPS No great detail required for an answer, but perhaps some references to suitable reading material that may give greater insight into how the market functions in the "real world" would be great........Cheers.

 

[RichKid]

...........

PPS No great detail required for an answer, but perhaps some references to suitable reading material that may give greater insight into how the market functions in the "real world" would be great........Cheers.

Hi Barney
Nick has given a few detailed examples and explanations here in this thread on trading using volume analysis so it may be worth having a look there as well, if you do a search on ASF using key words of interest you will find lots more material (several months or years worth of study can be generated by searching and reading a few threads! Lots of gems hidden on ASF). Hope this helps.

 

[cuttlefish]

Barney - Nicks comments are very valid and if participating on a high volume day you should be sure that you know the reason you're there - but for every example of the 'smart money' selling out in a high volume day there's an equal example of the 'smart money' actually selling out when there was plenty of future potential to come. (hence Nicks comment that high volume doesn't necessarily mean prices will drop).

Looking at the chart of just one stock - Zinifex (ZFX) - one of the strong risers of the recent resources boom with a lot of attention.

31/8/2004 - 22 million - highest volume for four months - 22 million shares changed hands - price range $1.83->1.86 - opened 1.83, close 1.84.

One month later (from 24/sept onwards) this stock consistently traded in a range above $2.

24/11/2004 - 25 million - highest volume since the august day mentioned above - price range - price range 2.25->2.29 - opened at 2.27, close 2.29 - the stock rose consistently for three days after this. Just over three months later the stock was trading at 3.40.

19/5/2005 - high volume - 24 million - 2.73->2.82 trading range just after an apparent bottom and on start of a potential uptrend (i.e. probably a time for smart money to be entering rather than exiting). Less than one month later - stock trading at 3.20 - this isn't a great example because even though its a narrow trading range it wasn't as narrow as prior and post days.

etc. etc. - and current price of this stock is $10.87.

Like anything with the market - if making money was as simple as shorting stocks that are in an uptrend and have just had a high volume, narrow trading range day we wouldn't need a market.

In the long run, strongly improving and compelling fundamentals will lead a stocks price higher, regardless of the activities of traders, punters, funds, smart money, gamblers, or "they, those, them" - and vice versa - but in the meantime all sorts of up and down games will go on and its worth getting an understanding of how those games play out.

One more example:

PDN (Paladin - big Uranium hit over past few years).

2 sept 2004 - volume of 14 million - highest volume day for 6 months - share in an uptrend - price range 23->26c - open 24, close 24.5. Potentially an indicator that the smart money is selling out. EXCEPT - the next day volume was 34 million and the price rose to 33c. 6 months later in march 05 it was trading at 1.10+.

 

[barney]

Thanks R/K I will certainly check that thread out. I am only just starting to realise how much "past" information is "buried" around here!!.........(Doesn't anyone realise I need to get some sleep!!! :sleeping ..........I am becoming obsessed with "educating" myself to the point of only getting 4 hours sleep a night..........Is this normal??? :freak3:

C/Fish, Interesting numbers! From what you show, there is "obviously" nothing "obvious" in what happens with volume/selling/sp etc. Makes it hard to "work out" what is going on??? I guess the only deduction we can come to is that the "market" (in the short term) can show very "random" characteristics..........
.........but then again, maybe those who were "selling out" on ZFX were also "buying in" and selling out again (and again) as the price rose/fell etc. , (because that is the way the market works......up a bit ...down a bit ....up a bit ..etc. etc) ......so maybe the "smart money" was being "very smart"!! (You can obviously make more selling /buying /selling (at the right levels of course) between a given price range , than just buying once and "sitting"....... I am only thinking out aloud here .......but you have just taught me something very valuable..........Thanks, Barney.

 

[RobinHood]

look it's different when analysing an individual stock. If your looking for insitutional selling in individual stocks just beware of:


climactic moves long after price consolidation areas, breaking of key trendlines and 50 daily moving average(You shoulden't own stocks below 50dma), abnormal breaks in price on heavy volume, gap downs etc.

 

[RichKid]

Thanks R/K I will certainly check that thread out. I am only just starting to realise how much "past" information is "buried" around here!!.........(Doesn't anyone realise I need to get some sleep!!! :sleeping ..........I am becoming obsessed with "educating" myself to the point of only getting 4 hours sleep a night..........Is this normal??? :freak3:
............

LOL Barney! Don't neglect your health, if you're not getting enough sleep you are probably not functioning at your optimum and that'll affect your learning. It is normal to get obsessed with this stuff for some, unfortunately emotions can ruin an account so take it easy and make notes as you go, your posts on ASF will be a record of your development as well so you can check back to see your past thinking.

....type in 'ultra high volume' in the search tool and see what you come up with- so you need to distinguish between very high volume and ultra high volume as Nick says elsewhere.

 

[barney]

LOL Barney! Don't neglect your health, if you're not getting enough sleep you are probably not functioning at your optimum and that'll affect your learning. It is normal to get obsessed with this stuff for some, unfortunately emotions can ruin an account so take it easy and make notes as you go, your posts on ASF will be a record of your development as well so you can check back to see your past thinking.

....type in 'ultra high volume' in the search tool and see what you come up with- so you need to distinguish between very high volume and ultra high volume as Nick says elsewhere.

Thanks R/K, Did the "ultra" search....only got the one extra thread, but some very interesting/informative stuff there....thanks......volume is a "big" player from my limited experience......important "signal" which give more creedence to other signals which "accompany" it .......without volume, many "signals" are only "pretenders".........is that fair comment??


climactic moves long after price consolidation areas, breaking of key trendlines and 50 daily moving average(You shoulden't own stocks below 50dma), abnormal breaks in price on heavy volume, gap downs etc.


Hi Robin Hood, can you elaborate on these comments for a "newbie", cause I am interested in the "thinking" behind the thinking....if that makes sense!? Cheers, Barney.

 

[It's Snake Pliskin]

Barney

...important "signal" which give more creedence to other signals which "accompany" it .......without volume, many "signals" are only "pretenders".........is that fair comment??

What is a signal and how important is that to what you want to achieve?