As I have noted in a number studies, volume as an indicator in junction with price can be a very important tell in to the timing of purchases and sales. This is the basis of my volume off the high series. Well, I wanted to expand on that series and now include volume to the high or stocks trading to highs on increased volume. Historically, stocks trading to highs, which I define as the 3-month maximum price, on volume that is at least 3x times the average tend to trade higher over the following six months.
Since the beginning of 1999, the average 6-month return on the S&P 500 has been 1.1% while the median six-month return was 2.8%. This is in contrast to the average and median performance for stocks trading to highs on volume. Stocks trading to highs on volume experienced average 6-month returns of 13% and a median return of 5.5%. Well over the return the S&P 500.
Graphically, the following charts shows the performance of the S&P 500 since mid-1999. The chart also shows the performance of S&P 500 companies after they reach new highs, on volume at any point in the last six months.
While this chart shows the difference between the S&P 500 and the performance index.
This is a momentum strategy and relies on the theory that high volume highs are suggestive of increased and continuing demand for the specific stock. I plan to chart the names hitting this screen in future periods. In addition, I will also work on optimizing the screen to achieve better results.
Since the beginning of 1999, the average 6-month return on the S&P 500 has been 1.1% while the median six-month return was 2.8%. This is in contrast to the average and median performance for stocks trading to highs on volume. Stocks trading to highs on volume experienced average 6-month returns of 13% and a median return of 5.5%. Well over the return the S&P 500.
Graphically, the following charts shows the performance of the S&P 500 since mid-1999. The chart also shows the performance of S&P 500 companies after they reach new highs, on volume at any point in the last six months.
While this chart shows the difference between the S&P 500 and the performance index.
This is a momentum strategy and relies on the theory that high volume highs are suggestive of increased and continuing demand for the specific stock. I plan to chart the names hitting this screen in future periods. In addition, I will also work on optimizing the screen to achieve better results.
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