Skip to main content

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position.

This first post in the series starts at the beginning: getting good investment ideas.

Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets.

As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professionals and other insiders when a stock is just beginning to make a move. If the stock represents a quality company and your research reveals that the stock has the potential for longer term appreciation, you will not be too late to invest and profit.

The lists we will see will have lots of stocks on them. We need some kind of criteria so we can weed through the list. My own typical criteria is for a stock to be coming out of a down-trend and starting to show some upside momentum. In other words, experiencing a reversal. Also, I tend to like stocks that are not too small (ie, no stocks under $1) and whose business I understand at least somewhat.

There are numerous measures of unusual activity and there are web sites that present lists of stocks based on the different measures. Let's take a look at a few.


First up is the Wall Street Journal Online. If you click on US Stocks and select the Most Actives: NYSE, Nasdaq, Amex link you will get a simple list of stocks that were on the most active list (greatest number of shares traded) for one trading day. I like this list because you can roll over the name of a stock and a box pops up that shows a chart and a few other useful pieces of information. This provides a very quick way to perform a high-level analysis and determine if you would like to investigate this stock further. Going down the list for July 20, 2007 I come across Starbucks (SBUX). This is a good-sized company and I understand their business. What about the chart? The pop-up displays the daily chart so I click on the "1 year" link and take a quick look at the one year chart. It has been in a down-trend, alright, but it appears that it might be undergoing a reversal. Clicking on the "10 days" link shows me that the stock price just recently popped up. This looks good and I'll file it away for further research.

Another good measure of unusual activity is Volume Percentage Gainers. For this exercise, we will limit ourselves to those stocks that showed a gain in price for the day. Staying on the Wall Street Journal site and looking through the list for the day of July 20, 2007 we find one company that looks like it might fit the bill, IDT Corp. (IDT). The stock was up 2% on daily volume that was 300% higher than usual. Something good must be going on here!


Gaps represent another kind of unusual activity. Over at the Schaeffer's Research Stock Screen Center, we can look at a list of stocks whose price jumped up. For the day of July 20, 2007 we find a lot of stocks that are already in a good, solid up-trend. The only one that shows a nice gap up from a down-trend is Partners Trust Financial Group Inc. (PRTR). Unfortunately, they gapped up because they are being acquired so they don't make our list.

Volume and Price Combined

Another good unusual activity screen at Schaeffer's is Yesterday's High Volume Gainers. These are stocks that have gained 3% or more in the previous day's trading on at least double the average trading volume of the past quarter. Here we find two potential candidates: Medicines Co. (MDCO) reversing from a down-trend and PRG Schultz Intl. (PRGX) that is breaking out of a trading range and moving to the upside.

Options Activity

Let's try one more at Schaeffer's site, Unusual Daily Option Activity. Explosions in volume may be the result of corporate news or an impending earnings announcement. They can also be spurred by "smart money" who may have an inkling that market-moving news may be on the horizon for the underlying security. Looking at unusual call activity, we find our friend Starbucks listed. So now we know that both stock and options activity have been unusually high for SBUX. This company definitely merits a deeper look.

In Conclusion

I have demonstrated how we can find investing ideas using unusual activity as a criteria. In the examples presented, we looked for stocks that had been in a down-trend and might be undergoing a reversal to the up-side. The technique could also be used to identify stocks that are already in an up-trend. Using this approach we can filter the universe of stocks and find those with potential.

Be sure to check back for the next post in this series where I will discuss stock screeners.


Anonymous said…
Dear Visitors,

This blog is really nice and informative. We do think our posting will be highly beneficial for you too. From past few days we have witnessed
major downward rally in Indian stock market along with other major exchanges. It was there due to fear of recession in USA which is major economy.

But if we talk technically then Indian stock market is set to go up but still trend is not clear as few indicators are giving buying signals and few are still giving selling

So we suggest everyone to wait till
Nifty touches 5350 before taking any long position.

If you have any query feel free to contact us.


Sharetipsinfo Team
Unknown said…
Dear Visitors,

This Blog is really nice and informative. We are pleased to know this
blog is really helping people. Its our pleasure to post
Informative content on this useful blog created by webmaster.

As we all know major stock market exchanges in India are

and NSE. Full form of BSE is Bombay stock exchange covering SENSEX
where as

NSE is
National stock exchange covering Nifty and Nifty stocks.

Now a days USA is facing recession which is affecting world market and
recently we have witnessed major fall in Nifty and Sensex.

In this fall many investors were trapped and loosed around 50% to 70%
of their portfolio which is a major issue and need to be taken care

Stock market is risky and will remain risk always still one can
minimize risk factor in it by using proper stoploss. As the name suggest
Stoploss , it stops the losses
which one can incur in the market.

There are few levels which we call support and resistance level which
we suggest one should strictly follow for coming days if they want to
survive in stock market.

Right now Nifty is direction less

Major suport-4660 below it next will be 4400.If breached then 4000.

On upper side Res- 5025 closed above can take Nifty to 5150-5200 . 2-3
closings above 5200 means 5400.

We suggest strictly follow these level and enter in market as per these
levels as these are very crucial levels technically.

Please feel free to contact us for any query.

Have a Nice trading days ahead.



9891655316, 9899056796 ,9891890425
Unknown said…
Dear Visitors,

This blog is really nice and informative. We are pleased to know this blog is really helping people. It’s our pleasure to post informative content on this useful blog created by webmaster.

We require 2-3 days positive closing else nifty can crash. Political issues are also hampering market along with inflation and crude oil price. Major support for Nifty is 3650 and Resistance is 4300. Nifty will remain range bound overall trend will be bit bearish in coming days.

For any query feel free to contact us.


+91- 9891655316
+91- 9899056796
+91 - 9891890425
sharetipsinfo said…

The market is currently enjoying a good rally which

has seen most stocks gain from competitive

advantage and it would be advisable for all stock

market enthusiasts to seize this opportunity and

plan their investments in a safer yet conducive stock

market. With NIFTY hovering around 4800-4900 +, it

is expected to take hold of this currently rally and be

realistically be closest to 5000 more so than before

in what should be its new 52 week high.

Lot many untouched stocks are still there which are

ready to blast any moment.



Popular posts from this blog

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation

Thursday Bounce: Trend Busters, Swing Signals and Trend Leaders for July 9, 2009

This is a quick post to announce that we have published Thursday's Trend Leaders, Swing Signals and Trend Busters at Alert HQ . All are based on daily data. Today we have the following: 72 Swing Signals -- A couple of days ago we had 35 signals, today we have twice as many. Happily, we now have 65 BUY signals, a mere 4 SELL Signals plus 3 Strong BUYs. Whoo-hoo! 56 Trend Leaders , all in strong up-trends according to Aroon, MACD and DMI. There are 18 new stocks that made today's list and 60 that fell off Tuesday's list. 48 Trend Busters of which 5 are BUY signals and 43 are SELL signals The view from Alert HQ -- Talk about mixed signals. If you look at our Swing Signals list you would think the market was in the middle of a big bounce. BUY signals are swamping the SELL signals and we even have a few Strong BUYs. Yes, there's a good sprinkling of tech stocks and tech ETFs but the distribution is pretty broad-based with a good number of different sectors represented, eve

Trade Radar gets another update

Some of our data sources changed again and it impacted our ability to load fundamental/financial data. In response, we are rolling out a new version of the software: 7.1.24 The data sourcing issues are fixed and some dead links in the Chart menu were removed. So whether you are a registered user or someone engaged in the free trial, head over to our update page and download the latest version. The update page is here: Contact us if you have questions or identify any new issues.