When you give a buy target on the plays along with a volume target, is the volume supposed to be at that number when the stock reaches the buy price or is the volume for the stock just supposed to be on pace to reach that volume by the end of the session? When you put out the plays each evening, are those plays supposed to be good until the stock reaches the buy target, even if that's a couple of days away, or is the play meant to be good for the next day only? (May 3, 2001)
First, the target price is the price for the day. It is where we want to see the volume at the end of the session on the move we are looking for. That is great, but what if the stock makes the move in the first hour? Most volume occurs early and late. If we see a stock jump up over the buy point on a breakout move early, we look to see if the volume looks on track to make that volume. That is a tough call because it is fluid. We would like to see a big surge that takes it 30% of the way there. So, we either look at time and sales or talk to our broker and ask if there are a lot of block trades going. Big breakouts from solid patterns are usually driven by institutions, and if we see a lot of 10,000 share plus trades, we have a good idea the big boys are buying. We follow them. If we see 5,000 share trades, even though they are not block trades, on a $50 stock that means someone is putting up $250,000; that is big money making a big call. If we see this kind of action we are usually buyers.
Second, the plays are good as long as they hold the pattern. We had THQI on eSignal with an alert set for two weeks before it made its move. All of the sudden one session the alarm went off. We looked, it was making its move and volume was spiking higher. That was all we needed to get in on the position. We have a list of many stocks with alarms set at buy points. We weed them out when the pattern breaks down and we drop them from the reports (though we watch them on a watchlist each day), but we keep those that still look good set and ready to go.
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