My December Stocks Watchlist Could Be…
By Brijesh Bhatia (@bbrijesh9 /X)
Pune, 28th November 2024: The stock market can be captivating, pushing investors to constantly search for the next big opportunity. A key element in identifying such opportunities is analysing volume—the number of shares or contracts traded during a given period. While a sharp move in stock prices often makes headlines, the accompanying volume provides vital clues about the sustainability of a price move and its potential to continue.
This article will explore how volume plays an important role in stock analysis. We will also take a closer look at the top 5 stocks that have demonstrated significant price movements and volume increases during November 2024.
As we approach the last few trading days of the month and anticipate the expiry day volumes, we must reflect on how these factors may influence the coming trading weeks and the overall market sentiment.
Understanding the Role of Volume in Stock Price Movements
Before diving into the analysis, let us first understand why volume is essential in trading decisions.
⦁ Confirmation of Price Moves: Volume confirms price movements. A high-volume price increase is often seen as a sign of strong buying interest, suggesting that the trend could sustain. Conversely, a price rise accompanied by relatively low volume must be viewed with scepticism, as it could indicate a lack of conviction behind the move.
⦁ Volume as a Leading Indicator: Volume can sometimes precede price moves, acting as an early signal of potential trend changes. For example, a volume increase before a price breakout suggests the market is gearing up for a significant shift.
⦁ Volume and Market Sentiment: Volume also provides insight into market sentiment. For example, high volumes during an uptrend might indicate strong investor confidence, while high volumes during a downtrend might reflect growing fear or panic selling.
⦁ Volatility and Liquidity: An uptick in volume often increases a stock’s liquidity, allowing for smoother price movements without significant price gaps. This can be particularly important in highly volatile markets, where low liquidity can exaggerate price swings.
⦁ Identifying Institutional Activity: Institutional investors often move the market by placing large orders. High volume can signal the entry of institutional buyers or sellers, as these large players tend to move stocks more than individual investors.
November in Retrospect: A Roller Coaster of Volatility
As we reflect on the events of November 2024, it’s clear that the market has experienced significant fluctuations, especially during the last few days. Strong rallies in certain stocks have marked these moves, while others have witnessed sharp declines.
While the month is not over yet, and the expiry day volumes will still provide further insights into the market’s direction, we decided to highlight stocks that have demonstrated notable price rallies in conjunction with exceptionally high trading volumes.
Specifically, we will focus on stocks that have experienced a 20%+ price increase and at least a 100% rise in volume compared to their 20-month average volumes. These criteria are critical because they suggest that both the price move and the volume surge are unusual, indicating heightened investor interest and potential for continued momentum.
Top 5 Stocks with a 20%+ Rise and 100% Volume Increase
Below are the top 5 stocks that have exhibited a combination of price appreciation and unprecedented volume increases in November 2024 (as of 26 November 2024):
Source: RZone, Definedge Securities
Key Takeaways
⦁ Volume is Essential: The combination of significant price moves and high trading volumes gives us more confidence in the sustainability of a rally or the potential for further gains. Volume is a sign of conviction and market participation, helping us understand if a price movement is backed by solid interest or is merely a short-term anomaly.
⦁ Identify Momentum: Stocks that show strong price action and explosive volume growth are often amid a momentum shift, which can offer lucrative opportunities for traders. However, assessing the underlying reasons for the surge is crucial—whether it’s a fundamental driver like earnings or a technical trigger like a breakout above key resistance levels.
⦁ Be Cautious with Expiry Volumes: As we approach expiry day at the end of November, be mindful that expiry volumes could affect price movements, especially for stocks with high options open interest. This can create volatility, so monitoring these changes is crucial for managing risk.
⦁ Watch for Trends in Other Months: The November rally exemplifies how seasonal trends, earnings cycles, and broader market conditions can affect stocks, particularly in specific sectors. Traders should assess whether this surge in volume is part of a longer-term trend or a temporary market reaction.
In conclusion, volume analysis remains one of the most powerful tools for interpreting stock market movements. By focusing on stocks with substantial price movements and volume surges, investors can identify potential opportunities backed by real market conviction, increasing their chances of making profitable decisions.
Disclaimer: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. This article is strictly for educative purposes only. As per SEBI guidelines, the writer and his dependents may or may not hold the stocks/commodities/cryptos/any other assets discussed here. However, clients of Definedge may or may not own these securities.
About Writer:
Brijesh Bhatia has over 18 years of experience as a trader and technical analyst in India’s financial markets. He is a well-known face in the business channel as a Market Expert and has worked with broking giants like UTI, Asit C Mehta, and Edelweiss Securities. He is currently a Senior Research Analyst and Editor at Definedge.
