well if hodson noticed this one (eng)perhaps others may be interested - note he doesnt officially recommend it.............national post Sat Jan 11/08
"An investor asked me recently what technical indicator I used the most. More to the point, he asked, "if you could only use one indicator to pick stocks, what would it be?"
I am going to hedge my answer a little bit. I do have one main indicator that I couldn't live without. However, the indicator is a combination of two separate triggers.
First off, I consider the new high list exceedingly important. I have discussed this in a column last year, so won't delve into it much here. The other indicator I favour is the Largest Volume Increase list, or LVI.
The LVI highlights those stocks, on a daily basis, that have an unusually large increase in trading volume. The larger the volume increase, the more potentially interesting a stock idea could be.
A big volume increase can have many different meanings, but one meaning is indisputable: Someone, somewhere, wants to own a lot of stock and has found a large seller or sellers willing to sell.
This is where my overlap indicator comes in. If you find a stock with a sharp increase in trading volumes, and that stock also is hitting the daily new high list, then you now know two things: Someone wants a lot of stock, and is willing to pay up for it.
If a stock hits a 52-week high on volume, it may mean nothing. But somewhere, someone is paying more for a stock to buy it in size. A stock hitting record highs (as opposed to 52-week highs) on high volume can be even more impressive as a technical indicator. In that case, it may mean an investor is willing to pay more than anyone else in history in order to accumulate a large position. Maybe that stock should be investigated to find out what's going on.
Combined, I think volume increases combined with new highs is a very useful technical indicator. It can sometimes be an excellent point of reference for finding new investment ideas, particularly for small, unfollowed companies.
To highlight my point, let's look at a few companies whose shares have had increasing volume and new highs recently. Note, these are not recommendations, and in many cases I am not yet even familiar with the companies mentioned. But as a point of reference, investors in aggregate have (a) bought an unusually large amount of stock, and (b) paid new highs in order to get that stock. Someone out there likes the stock, then, and our job is to find out why. Energulf Resources Inc. (ENG/TSX-V): On Monday Jan. 7, Energulf shares hit a 52-week high of $2.95 on volume of 3.8 million shares, more than 400% more than its typical volume traded. The day prior, it traded just over one million shares, also well above average. The company is in the process of drilling a $50-million well to a depth of 4,400 metres below sea level, in offshore Namibia. Sometimes, oil and gas producers' shares rise while drilling is ongoing. However, in Energulf 's case, the depth of the well implies a long drilling time, and it is far too early at this point to tell what the well's chance of success is. Still, the stock is up more than 60% already in 2008 alone.