How do you determine that a stock shows good money flow, strong buying and exhibits good price/volume action?
We use several sources to help us get an accurate read on technical indicators. The easiest is price/volume. For that, we observe what the price versus volume is telling us. Is the volume above average or below average? Is it rising or falling? Is there a trend? We compare that with price. Is it up or down on the volume? Is it forming a signature pattern? Is it choppy? Is there no pattern? From this we can ascertain many things about where the stock is likely to head in the future. We don't have space here to go into any detail, but we are preparing a seminar on technical analysis.
As for money flow, there are services that provide money flow indicators. We also look at block trades and whether they occur on up or down price. We view several sources (e.g., IBD) for accumulation patterns. We put all of these together and come up with a conclusion that money is flowing in or out. Sometimes we can't draw a conclusion.
As for buying, we go back to block trades, money flow, accumulation patterns, and information from institutional buyers. From that we can glean whether there are net buyers or sellers.
As you can see, it takes a lot to analyze these stocks on an individual basis. We scan to see which ones fit certain criteria, and then we go further. The idea is, by the time they make it to the newsletter, they represent very solid plays.
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