About Volume Surge

Times Staff Writer

The volume surge table in the “Daily Market Roundup” focuses on changes in trading volume. The stock tables include a figure called “volume percentage” (abbreviated as “Vol. %") for each stock.

This figure compares the previous day’s volume in the stock to its average daily volume for the last 65 trading days. A figure of "+50" means 50% more shares traded hands than the average of the previous 65 days.

For most investors, it’s more relevant to see the trend in trading activity than the actual number of shares that traded.

To that end, the Volume Surge tables show the stocks that had the greatest percentage increases in trading volume on the previous day as compared with their 65-day volume averages. The column containing that data is labeled “Dly. % Vol. Chg.” These tables appear Tuesday through Saturday.

The tables show the leading stocks in terms of volume increases in three categories: large stocks, mid-cap stocks and small stocks. A stock’s size is determined by its market capitalization (share price times number of shares outstanding), as explaine in the tables.

Many professional traders use volume increases to flag stocks for further research.

A significant increase in volume may result when a company issues important news, of course. In that case, the stock price may also move sharply up or down.

But investors may be more interested in the stocks that have had unusually high volume with only a modest increase in price. That may indicate that a small group of buyers is actively accumulating a stock, perhaps based on information not yet widely known.

Likewise, a stock with high volume whose price is edging lower, or staying stable, could be in a “distribution” phase: Large investors may be trying to quietly exit without tipping off other investors. This could presage a sharper decline in the price.

When researching stocks with large volume increases, investors should look into other details about the company and the stock, including:

* Large (or “block”) trades by major investors. Foreign institutional investors and other big players sometimes wish to avoid a dividend, distribution or other taxable event in a stock. In a move known as “dividend roll,” large blocks of stock may temporarily be traded to an intermediary that will receive the dividend, then sold back to the investor. The net effect on the share price may be insignificant.

* Stock splits. Stocks that split will sometimes be on the volume-increase table for a few days immediately after the split takes effect, simply because more shares will be available for trading--even though the effect on the price may be neutral.


Basic Q&A:

Q: What is the “Vol. %" figure that has been added to the daily stock tables?

A: This compares the previous day’s volume in a stock to its average daily volume for the last 65 trading days.

For example, a figure of "+50" means 50% more shares traded hands the previous day than the average of the previous 65 days. "-50" means half as many shares traded than the 65-day average. An equal (=) sign is used when volume is less than 1% above or below the 65-day average.


Q: Why focus on the percentage change in volume rather than the actual number of shares traded?

A: Volume changes can be as important as price changes when evaluating stocks because volume changes can indicate more—or less—interest in a stock.

For example, experienced investors take price movements more seriously when larger-than-normal number of shares have traded hands as well. By contrast, when volume is light, a price change may be less signficant because fewer investors may have felt strongly about the stock.

Because “normal” volume is different for every stock and changes over time, investors arguably cannot tell much from raw daily volume figures.

There are two other reasons why The Times believes the volume percentage figure is more useful than raw volume:

• Raw volume figures of Nasdaq stocks cannot easily be compared to New York Stock Exchange stocks because they volume is calculated differently on the two markets.

• After-hours trading is making it harder to define a “trading day” for determining raw volume. Internet and published sources may provide different volume figures, making it difficult to use more than one source.


Q: How can I track the stocks showing the largest daily percentage increases in trading volume?

A: The Daily Market Roundup includes special tables showing the stocks with the largest volume increases.