ACCUMULATION/DISTRIBUTION
Accumulation/Distribution:
Select from -5 to +5
There are many different ways to compute accumulation distribution from simple
On Balance Volume, (the first, from Joseph Granville) to more sophisticated such
as Marc Chaikins Volume Accumulation . The algorithm we have evolved is better
than others currently in use, (in our humble opinion), because it is a true measure
of the delicate balance between price advance/decline vs volume on a very reactive
basis with very little lag. Many times you will see price going up while this indicator
is dropping because internally the stock is setting up for a fall and visa-versa.
By following this indicator daily you can get a clearer picture of the true nature
of the stock's internal development.
Many people want to know how it compares to a national financial
newspaper's A/D indicators.
Of course we have no idea how they construct their indicator, but outside of them
probably have the most experience in its use over the last 12 years with more than
22000 investors who have used our interpretation.
Over that time we have used it as an integral piece of the puzzle in selecting shorting
candidates very profitably in our "Pitbull
Investor's© Guide to Shorting High Performance Stocks" .
While it has been highly successful, (over 750% in a four month period in 1998, 1100%
for the year), it still gave us late entrances that could have given us an extra
20% advantage because of built in lag.
We have developed our own algorithm that eliminates most of this lag without being
so responsive that you get whipsawed severely and at the same time gives an expansion
of detail at the top of the range to more accurately display changes in direction.
Stocks which have been high flyers in the 3-5 category that drop to a 1or 2 or
lower at the same time that other ranking indicators begin to decline are ideal candidates
for shorting. Stocks which have been climbing out of the lower registers that now
move into positive numbers accompanied with other favorable rank changes are probably
confirmed as good choices for continued growth.