V.4:4 (144-148): Cumulative Volume by Stuart Thomson

V.4:4 (144-148): Cumulative Volume by Stuart Thomson
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Cumulative Volume by Stuart Thomson

Do you need a street map in a new city? Do you need any direction before buying or selling a stock? Do you need to know the right time to buy or sell stocks? And, do you need a feeling of certainty once you have acted?

O.K. There is a technical tool available to anyone willing to do his own homework to achieve these ends. It is based on supply and demand and is called Cumulative Volume, or CV for short.

If technical analysis can provide us with guidance for determining (1) the future trend of the market generally, and (2) the future trend of the particular stocks one is following, then ultimately the investment results must be outstanding. This is the objective of my portfolio management system.

What causes a stock to move?

Haven't you looked at the price chart of a stock bumping along on a bottom or in a major downtrend and wondered if there was any clue as to when it would break out of such an unrelenting pattern?

We know there are two factors that strongly impact many aspects of our daily lives, namely, supply and demand. A recent example is the coffee price snafu. Could supply and demand also affect stocks? The answer is a resounding YES. The key ingredient that moves a stock is supply vs. demand for shares of that stock. But how do we measure the trading of stocks? We do so by examining the volume of shares being traded in the stock and look for the divergent pattern between the volume and the stock price. Normally, the greater the divergent pattern that exists between the CV and the stock price, the more interesting the stock becomes.

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