The Up/Down Volume Ratio is a powerful technical tool that identifies stocks that have a high probability of experiencing either a prolonged up or down move. This indicator identifies stocks that are either under accumulation (Bullish) or experiencing distribution (Bearish). The Up/Down Volume Ratio is computed by totaling the stock's volume on days when it closes up and divide that total by the volume traded on days when the stock closed down. The assumption is that if a stock closes up for the day, the volume was buying induced and thus the stock is under accumulation. Conversely, if a stock closes down for the day, the trading activity is deemed to be selling induced, a sign of distribution. Up/Down Volume Ratios greater than 1.0 are considered to be Bullish while ratios less than 1.0 are regarded as Bearish.
The following is an example of how this indicator is calculated. Assume that stock XYZ trades 100,000 shares on Day #1 and closes up 1/2 point. On Day #2, XYZ trades 200,000 shares and closes down 1 point. The U/D Volume Ratio for XYZ over this period would be 0.5 (100,000/200,000). A 0.5 ratio indicates that over the two day period, twice as much volume was attributed to selling as to buying, a negative for XYZ. Market Edge calculates Up/Down Volume Ratios over 50-day time periods and reports the value on the Second Opinion screen (U/D Ratio) in the volume analysis section.
Although the U/D Ratio is a powerful indicator, testing has concluded that it is the trend or slope of this ratio that signals a change in the trend of a stock's price not the raw value. The reason is simple. A ratio that is increasing from 1.2 to 2.5 indicates that there is a growing amount of buying induced volume, a bullish condition. However, if the ratio is declining from 2.5 to 1.2 there is an increase in selling induced volume, which is a bearish situation. In either case the U/D ratio is regarded as bullish since it is above 1.0.
In order to determine the slope or direction of the U/D Ratio, Computrade Systems Inc. has developed a proprietary indicator called the Up/Down Volume Ratio Slope (U/D Slope). U/D Slope is the linear regression line of the U/D Ratio. The indicator is bullish when the angle of the regression line is rising. Conversely, when the line is pointed down, the indicator is bearish.
To illustrate the predictive power of these indicators, refer to the chart of IBM located below. The first graph positioned under the price chart is the U/D Ratio. This indicator is regarded as bullish when its value is above 1 and bearish when less than 1. The graph under the U/D Ratio is the U/D Slope. This indictor is bullish when the value is +1 indicating a positive slope of the U/D ratio. Conversely, when the slope is negative, the indicator will be a bearish -1.
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In Market Edge / Second Opinion, deteriorating technical condition is identified by a Score from -1 to -4. Stocks with a lower score have greater technical deterioration. Score Score is a value between -4 and +4 and indicates whether the technical condition of the stock is improving or deteriorating.
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These Opinions have an historical accuracy rate of over 70 percent with the winners typically outperforming the losers by a 3:1 ratio. These Opinions enable the user to formulate an unbiased, consistent, disciplined approach as to when to BUY and, more importantly, when to SELL.
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This means, on average, the S&P 500 has experienced: a correction once every 2 years (10%+) a bear market once every 7 years (20%+) a crash once every 12 years (30%+)
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Power Rating
Readings vary between -60 and +100. Plus 60 and higher is regarded as bullish and will trigger a Long Opinion, while readings of -27 and lower will generate an Avoid Opinion.
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Stocks with a score of 8, 9, or 10 are considered Outperform. Stocks with a score of 4, 5, 6, or 7 are considered Neutral.
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Trading Edge Formula
EV, for short, is technically defined as the sum of all possible outcomes multiplied by the probability of each outcome's occurrence. EV can be used as the most rudimentary form of trading edge. If EV is negative, we should not take the trade.
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Basics of a Buy Stop Order
An investor is willing to open that short position to place a bet that the security will decline in price. If that happens, the investor can buy the cheaper shares and profit the difference between the short sale and the purchase of a long position.
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Zacks has built a reputation as a reliable source of stock data for investors looking for a stock picking edge, Zacks' free stock screener has almost everything investors need to make well-timed and informed stock picks. That's why Zacks is our choice as the best free option for a stock screener.
The MarketEdge Second Opinion is the fastest and easiest way to harness the power of technical analysis to guide you to better trading decisions. The Second Opinion report is a technical research report that weighs the supply and demand characteristics of a stock or ETF.
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Mark-to-market (MTM) often does not give an accurate picture of an asset's value during market volatility, like a financial crisis. Additionally, not every asset will have a fair market value that is easy to determine, either because it is not openly traded or is difficult to quantify.
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C-Rate (Confidence Rating)
C-Rates of +8 or higher, coupled with a Long Opinion, denotes a Strong Buy. Conversely, C-Rates of -4 or lower, when coupled with an Avoid Opinion, suggest a weak condition. C-Rates change in value as a stock moves closer to its projected target, eventually reaching zero.
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Some of the common indicators that predict stock prices include Moving Averages, Relative Strength Index (RSI), Bollinger Bands, and MACD (Moving Average Convergence Divergence). These indicators help traders and investors gauge trends, momentum, and potential reversal points in stock prices.
Is a call option bullish or bearish? ›
Is Buying a Call Bullish or Bearish? Buying calls is bullish because the buyer only profits if the price of the shares rises. Conversely, selling call options is bearish because the seller profits if the shares do not rise.
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On average, corrections have happened about every two years and lasted a few months. However, they can take place more or less frequently. Bear markets have happened less often than corrections but tended to last longer.
How often are stock market analysts correct? ›
One study looked at the track record of stock market “experts” who predicted the market's direction. Their findings were eye-popping. Overall their accuracy rate was only 47%, less than you might expect from random chance. Jim Cramer, a fixture on CNBC, had an accuracy rating of 46.8% based on 62 forecasts.
How accurate are market forecasts? ›
Across all forecasts, accuracy was worse than the flip of a coin—on average, just under 47%. The distribution of forecasting accuracy by the gurus looked very much like the bell curve—what you would expect from random outcomes. The highest accuracy score was 68% and the lowest was 22%.
How often does the market correct 10%? ›
A market correction is considered to be a decline of 10% or more from the recent closing high. That means that historically speaking, the S&P 500 has experienced a correction every 1.84 years.
The Up/Down Volume Ratio is a powerful technical tool that identifies stocks that have a high probability of experiencing either a prolonged up or down move. This indicator identifies stocks that are either under accumulation (Bullish) or experiencing distribution (Bearish). The Up/Down Volume Ratio is computed by totaling the stock's volume on days when it closes up and divide that total by the volume traded on days when the stock closed down. The assumption is that if a stock closes up for the day, the volume was buying induced and thus the stock is under accumulation. Conversely, if a stock closes down for the day, the trading activity is deemed to be selling induced, a sign of distribution. Up/Down Volume Ratios greater than 1.0 are considered to be Bullish while ratios less than 1.0 are regarded as Bearish.