A 4-Step Volume Price Strategy to Help See Where Institutions Are Investing

Hello everyone and welcome to the moomoo cafe. As part of our "Coffee with an Investor" series, we sit down with our experienced investor and give you at home financial tips and strategies, all in the time it takes to have a cup of your favorite brew.

We answer your questions, with straightforward and digestible information. So sit back, grab a cup, and enjoy.

Big institutions often play a key role in shaping the market.

Knowing where they put their money could help guide your investment decisions.

In today's video, we'll discuss how to use volume price strategy in this earnings season to help see where big institutions are investing.

Earnings season tends to be volatile and can present numerous investment opportunities. However, not everyone can profit from it. Let's have a look at the following two examples to see where some investors can run into problems.

Before the release of Meta's financial report in April 2023, the price dropped from $222 to $207. After the report was released, it rebounded to $241.

Before the release of AMC's financial report at the end of 2022, the stock fell for eight consecutive days. But, like Meta, after the release of its report, it rose more than 30% in the following two days.

Within such a volatile market, investors can easily fail to catch the momentum. To give themselves a better opportunity at timing the market more effectively, investors can benefit from trying to learn where the institutions are investing.

In this video, we will show you a 4-step volume price strategy to help identify where big institutions are putting their money.

To recognize momentum, we need to identify any existing trend first. Drawing tools may help with this. Try to find a downtrend by connecting lower lows and lower highs, or find an uptrend by connecting higher lows and higher highs.

Volume represents market activity and liquidity, reflecting the level of demand and supply.

High volume shows high liquidity, and high liquidity means that there are a large number of orders to buy and sell in the underlying market.

To help you better understand volume, we take a look at a volume indicator on moomoo called Volume Oscillator.

Open a chart of the stock that you're interested in, and find VOSC among indicators. If it is not within the list, click on More to add it.

Volume Oscillator helps to determine if the overall volume trend is increasing or decreasing.

High VOSC indicates increasing volume trend, presenting strong momentum. Low VOSC indicates decreasing volume trend, presenting weak momentum.

However, volume does not indicate the direction of momentum.

To help determine it, we need to combine VOSC with price action.

Generally speaking, if the price goes upwards with the volume oscillator increasing, it reflects2trend.

If the price goes downwards with the volume oscillator increasing, it reflects a strong downtrend.

Conversely, if the price goes upwards, with the volume oscillator decreasing, it reflects a weak uptrend. Investors should be careful if they are considering taking a bullish position, as it might show that the uptrend is losing its momentum.

If the price goes downward, with the volume oscillator decreasing, it reflects a weak downtrend. This shows the downtrend may be losing its momentum, and investors should also be careful if they are considering taking a bearish position.

Once the direction and momentum of the trend is known, traders may use various candlestick patterns for further analysis.

For instance, if investors find a weak downtrend followed by a bullish pattern, it could be a potential signal of strong buying pressure. In such a case, investors might want to carefully consider before taking a bearish position.

If investors find a weak uptrend with a bearish pattern, it might indicate a potential signal of strong selling pressure. In such a case, investors who are considering establishing a long position should be alert.

To review more about candlestick patterns, you can take a look at moomoo's free Trading Tutorials under Learn Tab, where commonly used candlestick patterns are introduced.

Let's take a look at two examples of AMD and BAC. From December 2022 to January 2023, AMD saw an overall downtrend. You may find a decreasing Volume Oscillator at the second half of the trend. On January 4th, a hammer pattern formed, while an increasing Volume Oscillator also takes place. Downward price with decreasing volume oscillator indicates a weak downtrend. Together with the bullish signal, it presented the potential for strong buying pressure. As it turned out, the stock price climbed after the signal formed.

Another example is BAC. After it released its earnings report in January 2022, the stock dropped for several days and then formed an uptrend. At the end of the uptrend, a bearish engulfing pattern formed along with the volume oscillator decreasing. Upwards price with decreasing volume oscillator indicates a weak uptrend. Together with the bearish signal, it presented the potential of strong selling pressure. In this case, the stock price fell after the signal formed.

Apart from technical analysis, investors could also leverage some useful tools on moomoo to directly track the actions of big institutions, such as Institutional Tracker.

By watching the trading activity of large institutional investors, it may be easier for individual investors to get a clearer understanding of supply and demand, or buying or selling pressure.

With Institutional Tracker on moomoo, traders can easily access both the holdings list and the holdings changes of top institutions,including increased position, decreased position, new position and position sold out.

Let's take Berkshire Hathaway as an example. The institution increased its position of 5 stocks recently, including OXY.

Looking closer, we find that since 2022 Q1, there is consistent increase in the position of OXY, which might show a relatively positive perspective of OXY as it continues investing money into it.

Scroll down to the section of Trending Stocks and you can also find stocks that appeal to institutions under Most Held. You can then see the changes in buying and selling pressure from Position Increase and Position Decrease.

That's all four steps for today's Volume Price Strategy breakdown. I hope you enjoyed having coffee with us at moomoo. Don't forget to hit the like button or subscribe.

We will be meeting regularly for coffee in the moomoo cafe, sharing pro-level investing knowledge that's straightforward and easy to understand. If you've utilized indicators or Institutional Tracker on moomoo, feel free to leave your thoughts and suggestions in the comments section below.

See you next time.