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Ph.D Physics University of Michigan
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  • 10 Stocks showing unusual volume with no price movement...yet

    http://thequantinvestor.blogspot.com/

    One of the most popular sayings you'll hear in Investing 101 is, 'Volume leads price', and rightfully so, this statement has a lot of truth to it. Often times institutions, hedge funds, or large groups of retail investors will begin buying shares of a company that they have some belief will rise in price. Sometimes there will be an abundance in supply of the shares however, and the initial buying surge won't cause an immediate rise in price.  Nonetheless, as the market adjusts, whether it be though continued buying pressure, or a lack of supply in shares at the next-nearby price levels, the stock will rise.

     

    The key to exploiting these situations is identifying these pre-price volume surges. The laws of statistics give us an extremely straightforward and simple way to do this. Standard deviation (STD) tells how much an occurrence of a certain value varies from its mean value. For a stock price, its price change STD tells us how much price changes vary around its mean value, usually zero. For volume it tells us how much the volume changes from day to day, around its average volume.

     

    However, the most important thing STD tells us is the CHANCE of that value occurring. Most statisticians, and scientists concur that any value that lies 2 STDs away from the mean is a SIGNIFICANT CHANGE. Mathematically, a value only lies 2 standard deviations away from the mean < 3% of the time, quite a rarity!

     

    We can use this information to tell us which stocks are showing unusual volume surges, those that are 2 STDs above the average, or in the + 97th percentile. Unfortunately, most stocks with these rare volume surges have already risen/fallen in price. The key is to add another restriction, only looking at stocks that have less than a 1 STD change in price, a perfectly normal price change. 

     

    Below are 10 stock currently showing this abnormal increase in volume, but not yet in price. I have calculated them over 5 day moving averages to smooth it out. I can make no promises that institutional investors are buying, or that the price will rise 100%, but they make for interesting cases you should at lease look at.

     

     

     

             Symbol     Volume STDs above normal      Price STDs above normal 

             SNBC                     18.0386                                  0.0461 

             PZZI                         9.758                                    0.2315 

             OVRL                      9.2366                                   0.7816 

             PSMT                      8.7327                                 -0.5465 

             HBHC                     8.0493                                   0.7592       

             HA                          7.0763                                  -0.7769 

             GPOR                     6.9729                                   0.3764 

             EEI                          6.9287                                  0.6595 

             PLAB                      6.348                                   -0.5453 

             WTSLA                  6.3226                                  -0.1031  

     

    (Note: I will be adding a listing of the top 5 abnormal volume - normal price stocks to the daily BAT Computer report.)

    (Note2: These measurements assume Gaussian statistics for stock price movements, a better approximation is a Levy skew distribution, which complicates things and is somewhat unnecessary for this case.) 
    Tags: SNBC, PZZI, OVRL, PSMT, HBHC, HA, SPOR, EEI, PLAB, WTSL
    Mar 23 11:00 PM | Link | Comment!
  • I am pleased to inform you that the BAT Computer version 0.9 is now complete! Every day I will post an update screenshot of the program giving you a unique insight into the market. Also, coming soon will be the final component of the computer, a neural ne
     I am pleased to inform you that the BAT Computer version 0.9 is now complete! Every day I will post an update screenshot of the program giving you a unique insight into the market. Also, coming soon will be the final component of the computer, a neural network that 'predicts' the movement of the stock market.


    http://thequantinvestor.blogspot.com/
     

    For a description of each measure go to the tutorial at

    http://thequantinvestor.blogspot.com/2011/03/bat-computer-market-analysis-software.html

     

    (Click image for full size view)


    Mar 21 8:38 AM | Link | Comment!
  • Is the .com bubble re-inflating around social media? Part 1

    The 100 billion dollar question around Wall Street is and always will be, 'What is the next bubble?' In 2000 it was the .com boom that saw the NASDAQ rise to over 4,000 points. In the mid 2000's it was the real estate explosion that eventually led to the sub-prime mortgage collapse and the recession. If you ask most investment minded people today what they think the next bubble is, a large percentage would likely tell you that it's the social media .com bubble, and it's already forming. With the enormous valuations of Facebook and Groupon (both private for the time being), this claim is hard to argue with.

     

    In this series of posts, I will try to quantify IF, and how much, this bubble is really inflating. We will use three measures taken with data over the last two years:

     

    1. A side-by-side comparison of the stocks performance vs. the NASDAQ

    2. The difference in percent change the stock price and the NASDAQ

    3. A momentum measure defined as:

        Momentum = daily relative change in stock price* daily relative volume,

        then taken as a 50 day moving average.

        Any momentum > 0 suggest higher prices on higher volumes and any momentum < 0 suggests lower prices                       on higher volumes.

     

    These three measures will give us a good idea of how quickly these stock prices are inflating in comparison to others, as well as the overall buying/selling sentiment in the stock. I encourage readers to suggest additional measures if they have any good ideas.

     

    We begin with three of the biggest players in the field; Apple, Google, and Sina Corp.

     

    Apple (aapl) is an interesting case because it is not directly involved social media. Instead they build the hardware (ipads, iphones, itouches, itunes) that social media would be much smaller without. Nonetheless, the two are intricately related, and Apple is undoubtedly at the forefront of this field.

     

    The direct comparison of Apple (red) and the NASDAQ (blue) is well known, Apple has been a market leader since the end of the recession.

     

    What's even more impressive is that the difference between the two (top plot) has been steadily increasing as well, indicating that appl is further separating itself from the market. One worrysome indicator however, is that the momentum (bottom plot) has temporarily dipped below 0, possibly indicating a pullback in aapl stock.

    _________________

    Next up is Google (goog), a major company that is primed to reap the benefits of social media, but has barely gotten its feet wet yet. Sure, the Android is a fine competitor to the iphone but a single device is likely not enough. Still, Google's failed buyout of Groupon last year shows that they definitely want in. Check out GoogleMe and stay tuned...more to come later on that.

     

    The same analysis of Google shows a much more wild ride over the past two years,

     

    Google (red) NASDAQ (blue)

     

    where we definitely don't see the bubblicious qualities that marked Apple, but its performance is still impressive. This is perhaps an excellent indicator however of Google's lack of exposure to the social media market. But stay tuned, Google may be hopping on the train very soon.

     

    _________________

     

    Finally we come to Sina Corp. (sina) which runs a Twitter-like operation in China. 

     

     

    Sina's performance is impressive, with a divergence from NASDAQ more than twice that of Apple's, and growing. Sina's momentum is also impressive (except for the past month), with a momentum peaking at 4 times that of Apple's. Sina's stock price is going exponential, the tell-tale sign of a bubble, but with no end in site yet.

     

    From this snapshot, we can clearly see that, with the big boys, the bubble is surely forming. But three companies do not make a complete picture and there is a lot more left to study. Part 2 of this series will cover smaller-cap stocks that are more exposed to the social media market.

     
    Tags: SINA, GOOG, AAPL
    Mar 17 10:30 AM | Link | Comment!
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