Phil Town
Phil Town

For those of you interested in learning more about volume spikes and institutional money flow, read on:


When should I get out when I make a mistake? I'm learning that green arrows can vanish quickly.

I've done my homework. I believe I understand the business, it has a moat, management is trustworthy and an MOS price has been realistically decided.

As soon as three green arrows appeared I purchased but may have pulled the trigger too soon. Within hours the price dipped back below the moving average and the green arrow vanished.  MACD and Stochastic still are green.

Do I simply wait until all three are red to get out?

Should I have waited longer to get in, especially if the institutional money is still flowing away from the industry group?  (The business is SAY and the day it briefly had three green arrows was 6/9/06.)

I'm just starting the Investools class.  In addition to the 3 green arrows they discuss volume spikes and rising Institutional support for the industry group as the buy signal (two green squares).

Are these other buy signals (Volume spikes and Industry Group trends) important to Rule One Investors? Are some of the Investools recommendations more trader oriented than investor oriented?

Thanks,Mike P.

My response:

Hmmm.  I'm looking at SAY for June and July and what I see is that there was an entry point with three greens on around the 20th of June at $32 with an exit (sideways red red) at $32 to $33 around the 10th of July. 

Then another three green entry at $32 around the 20th of July and as of today, Aug 1, it's at $34.50.  Pretty sweet so far!

Regarding institutional money flow, when you were first entering in June it was moving sideways to slightly up and then started rolling on up.  I LOVE groups in the red with low numbers that are moving up week by week like this one.  4 to 5 to 10 to 9 to 11 and so on looks really good for money flow going in there.

Regarding volume spikes.  Love them too and you have them for both entry points in June and July. 

I didn't write about spikes and groups so much in my book because it's harder to get that info on free sites. But if you have the tools like on Investools, use them by all means.

Regarding SAY as a Rule #1 stock:  It's a newbie to the world of consistent results.  Growth has been wonderful in equity and sales, but until the last five years EPS and FCF growth has been not so wonderful. That puts this one in the risky biz category immediately along with Google.

So keep a limit on what you're tossing in there (although the last five years are looking quite solid and a few more years of this will open this one up to a bigger piece of the pie). 

And the MOS on this one is huge.  I don't know what PE you used for a 22% grower but it's been ranging from 21 to 58 and certainly can justify a 44.  In which case this $30 stock is worth ballpark $140.

Whoa baby!  I'm certainly going to dig deeper and see if these guys have a better future than CTSH or INFY.

What do you think?

Now go play.


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