{"id":25200,"date":"2013-03-14T10:33:21","date_gmt":"2013-03-14T14:33:21","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=25200"},"modified":"2023-04-25T17:45:20","modified_gmt":"2023-04-25T21:45:20","slug":"how-do-you-determine-how-far-stock-can-move","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/how-do-you-determine-how-far-stock-can-move","title":{"rendered":"How Do You Determine How Far a Stock Can Move?"},"content":{"rendered":"

Hi Bella,<\/p>\n

I have a question.<\/div>\n
<\/div>\n
I noticed in one of your blog posts a comment from one of your traders during trade review. Specifically it was a statement anticipating somewhat of a certain length move based on daily avg volume\/relative volume compared to ATR.<\/div>\n

 <\/p>\n

Now, I realize there are many things that move a stock- but my question is more specific, which is: if a stock is A) moving w\/ the market, B) has above average relative volume at entry point, C) maintains that higher-than-average volume level (say 2x or above) and D) have good liquidity\/order flow, etc., should the length of anticipated movement in relation to ATR move in accordance with the higher volume? \u00a0I.e., 2-3x volume = 2x or more ATR as anticipated volume? There are many times I use ATR, and if volume is good I will tier in. But I’m always somewhat hesitant as to the proper target exit point because experience has shown me that ATR, although accurate to a point \u00a0for target exit areas (confirmed of course with price & volume action) with normal or slightly elevated volume runs short, doesn’t work as well with higher volume momentum runs.<\/div>\n

 <\/p>\n

I used the volume = price movement correlation as I question with a couple movers today for example, VMW & EXPR.<\/div>\n

 <\/p>\n

VMW ATR (finviz) = 2.09. Relative volume today for VMW was 3.4. \u00a0Take that x the ATR of 2.09 = a $7.12 move. \u00a0 Todays range (open to close) was = $7.45.<\/div>\n

 <\/p>\n

EXPR ATR = .65. Relative volume today was thru the roof = 7.5. Can’t expect that obviously but todays range was $2.14 or 3.2X ATR. My experience is that unless its extremely unusual circumstances – beyond 2.5 – 3X ATR is as good as it gets on an intraday basis. Bottom line: does this correlation hold true a lot? I will do more research on my own – but thought I’d ask the you\/the source too – :0).<\/div>\n

 <\/p>\n

Thanks. And thanks for all the great info you and Steve continue to put out. \u00a0 It’s amazing what someone paying attention can learn just watching and listening to you guys.<\/div>\n

 <\/p>\n

@mikebellafiore<\/strong><\/div>\n

 <\/p>\n

So I love the work you are doing with your trading. And your question requires a complicated answer, which does not fit for a blog post unfortunately. If you were on my desk, a\u00a0comprehensive\u00a0answer would take a fifteen minute one-one-one conversation between me and you. But I will give you a start and you can work from there.<\/div>\n

 <\/p>\n

Increased volume may be a signal of a greater intraday move. I like your focus and work to make\u00a0mathematical\u00a0sense of this. Keep going here.<\/div>\n

 <\/p>\n

Determining how far a stock can move intraday takes experience, structured thought, and trading tools. Spencer does a wonderful job preparing the desk for the best stocks to trade with the SMB AM Meeting<\/a> because he has seen 15 plus years of trading patterns<\/a>. Often I sit on the desk and wonder why some of our traders are not focused in stocks I sense can really move. Often intraday trading is more about being in an opportunity that can pay you if you are right and leave you only with a small loss if you are wrong. It isn’t about picking the direction of a stock correctly; it’s about being in a potentially explosive move that can be the game.<\/div>\n

 <\/p>\n

I like to start with analyzing the news, the intraday fundamentals for an opportunity. Will this news bring heavy new order flow? In The PlayBook<\/em><\/a> I outline many examples of \u00a0news that will create a Super Stock In Play, a stock that may really move a lot intraday. So if the news will bring heavy order flow intraday, then I play for a bigger move.<\/div>\n

 <\/p>\n

I like to watch the first few legs of a move. Over time you get a sense of how far a stock should move when it makes a strong move. \u00a0And then you will see very explosive first leg moves. You may particularly see this during an Opening Drive. If I see an explosive first move, then I will expect a bigger intraday move from the stock.<\/div>\n

 <\/p>\n

Reading the Tape<\/a> gives us clues to how big a move a stock can make. I want to see a clean stock, with levels held and without the above\/below and wicks everywhere nonsense. The cleaner a stock holds important levels the more I suspect it can move. This cleanliness indicates\u00a0out-sized\u00a0directional interest.<\/div>\n
Also I look at the longer term technicals and stocks that have a distance to travel to their next important level.<\/div>\n

 <\/p>\n

This was not meant to be an exhaustive review of how to determine how far a stock can go.<\/div>\n

 <\/p>\n

But I hope that gives you some good ideas to start working on.<\/div>\n
Tomorrow we can be better than today!<\/div>\n

Mike Bellafiore
\nThe PlayBook<\/a><\/em><\/p>\n

One Good Trade<\/a><\/em><\/p>\n

\"\"<\/a><\/p>\n

no relevant positions<\/p>\n","protected":false},"excerpt":{"rendered":"

Hi Bella, I have a question. I noticed in one of your blog posts a comment from one of your traders during trade review. Specifically it was a statement anticipating somewhat of a certain length move based on daily avg volume\/relative volume compared to ATR.   Now, I realize there are many things that move a stock- but my question … Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[2587,504,608],"class_list":["post-25200","post","type-post","status-publish","format-standard","hentry","category-mike-bellafiore-bellas-blogs","tag-determine","tag-move","tag-stock","no-post-thumbnail"],"yoast_head":"\nHow Do You Determine How Far a Stock Can Move? | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/how-do-you-determine-how-far-stock-can-move\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How Do You Determine How Far a Stock Can Move? | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Hi Bella, I have a question. 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