If a stock has met the buy point but has not yet hit the precise daily volume you want, should a buyer wait until the stock has met or exceeded that volume – perhaps waiting to purchase the stock on the day after the recommended daily volume has been met? Or do you suggest simply keeping tabs on the volume throughout the day as a percentage of the daily volume it is likely to achieve? Generally, is it ever wise to buy a stock when the buy point has been met but the volume has not yet entirely filled out?
Volume levels can be hard to gauge. Volume is heaviest in the first hour and last hour as institutions make their bets for the day and position themselves for the next session. Many times we will see volume shoot up on a breakout early in the session, and that is a clear signal to enter. Other times we see the price hit our target, but volume is on a pace that appears to be average for the day. Other times we don’t see the target price hit until the afternoon when institutions buy for the close. That is always the easiest point to gauge what is going on, and one of our favorite times to buy as we can see the stock and the market action to make decisions for the next session.
If we see a breakout in the morning but are just not sure of the volume, we often just enter a partial position on the stock. That way we are not wholly committed to that move, but it gets the position started, and if the breakout proves to garner sufficient volume later in the session, we like to take the remainder of the position on a test of the breakout or at the close if the stock has not moved beyond our buy point by 5%. That way we get a better picture of what is going on without losing the first stage of the breakout. If volume is so-so, we can sit pat on our initial position and let the stock build the next session as you indicated. Many times we see that first move up one session, and then we see the institutions pile in even more the following day. At that point we go ahead and complete the position with our stock buys. We will also look at option positions the same way.
