Friday, May 04, 2007

Stockfest: Money Flow Breakout in VZ

A while back I indicated that I'd be holding a stockfest, examining individual equities with interesting money flow patterns. Since then, we've looked at Toshiba, the semiconductor sector, Amazon, and the Dow 30 Industrials. I'll be covering some of the suggested stocks from readers in upcoming posts.

To kick off the stockfest, here's one mentioned yesterday by a reader. As the chart above shows, Verizon (VZ; blue line) broke out of a range on elevated volume. Just as important, money flow (pink line) jumped on the rise, indicating that much of this volume can be attributed to buyers lifting offers.

We saw similar buyer aggressiveness in late 2006, leading to higher prices into early 2007. Note that, since that time, money flow has been consistently positive for VZ. Clearly, large market participants have been displaying interest in the stock.

One interesting tell leading up to the breakout: When I compute relative dollar volume flow by expressing money flow as a proportion of total volume, several spikes in relative flow on rising stock prices can be seen to precede the recent market move, most notably on 3/30 and 4/16. I continue to find that screening for jumps in money flow can help target stocks that are candidates for breakout moves.

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