Raising Gains with Higher Volume

 | Jun 01, 2012 | 4:06 PM EDT
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When a stock shows price gains in heavier-than-average volume it is often an indicator that further upside moves are coming down the pike. The heavy turnover means institutional investors have conviction about the stock and are getting on board.

Stocks that show this kind of robust technical action in a market downturn are often setting up for the next market rally. One of my own biggest successes from tracking a big mover in a downturn was Green Mountain Coffee Roasters (GMCR) in early 2009. Before the major indices went into rally mode, Green Mountain was showing bullish chart action, including some days of significant price gains in above-average trading.

Keep in mind, I am not discussing buy-and-hold investing here. I was long out of Green Mountain before it began its big tumble in September of last year. But as an early runner out of the gate after the 2009 uptrend got started it was a big winner.

A little known Utah-based nutritional supplement maker, Schiff Nutrition (WNI), was a heavy-volume mover on Thursday. It finished 2.2% higher at $16.80, about 3.3% below its prior high of $17.37.

The stock is currently holding above all its key moving averages. In a bull market, this would be a buy candidate. But as I've noted here for the past few weeks as the general market has been in a downturn, new buys are risky. It's all too common for even strong performers to get smacked around in a fresh bout of heavy marketwide selling.

This is a small company with a market cap of $491 million. It moves only 68,000 shares per day, on average. The thin trade means, of course, that investors need to be extra vigilant about big price swings in either direction. Schiff reports earnings on June 21 so that could serve as a catalyst for a sizeable move.

One more note about Schiff. This week the company said it would change its ticker to SHF, effective June 11.

Another small-cap upside that has shown signs of accumulation lately is Core Mark Holdings (CORE). The company distributes various items to convenience stores. It's not unusual to spot Core Mark trucks outside such locations.

The company's market cap is just shy of $500 million. Core Mark is even more thinly traded than Schiff with about 48,000 shares traded per day.

Core Mark bolted 9.9% on May 8 in nearly triple regular turnover after reporting its first quarter. Since then, it's had five other sessions with gains in heavy volume. Despite the market gyrations in recent sessions, Core Mark has held steady above its 10-day line, a sign that the institutions that own shares are content keeping the price at that level.

It closed Thursday at $43.49, down 1% from Wednesday's multi-year high of $43.94.

This type of support this stock is getting frequently precedes a further run up. But poor market conditions, such as we're currently seeing, serve as a weight on the stock. In a better market, stocks that have been trending sideways often vault higher.

Finally, electrical equipment maker Ametek (AME) finished 0.6% higher Thursday at $50.71. Volume in the session was double normal levels.

The stock has been consolidating near its 10-week line since early May below its previous high of $52. Like Schiff and Core Mark, this is another stock potentially setting up for further gains.

The mid-cap is expected to report double-digit earnings gains in 2012 and 2013. The company is expected to report its second quarter sometime around July 26.

With the market in a downturn, it's premature to say whether the prior high of $52 will be the next viable buy point.

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