Tuesday, May 02, 2006

Simple as supply and demand just like economics in high school

Supply and Demand just like economics in high school

It's really not rocket sciences. Just like what you learned in High School in that basic economics class, when stocks are in demand the price usually the key word being USUALLY should be going up. The way to check the supply and demand is by simply watching the daily trading volume of the stock. The stocks raising price should be followed or coincide with volume. This which in fact should show a good buying power move for the stock. The same should go with the other end, say if the stock is less in demand or when the price falls so come the volume of the daily trading volume. It's really something to be aware of, and check in for yourself.

Key thoughts when looking at economics in high school supply and demand of a stock:

- Beware of the daily volume of the stock. We suggest that you don't even touch a stock that has less then a daily average of 500,000 volume.
- Stocks that are really moving should show a volume increase of 100% or even more in some cases.
- When a insider buying or companies buying back their stock in the open market could be a green light that this stock is a winner.
- Watch the past 50 trading days. So if a stock is trading 1,000,000 on the average, and then it starts showing a volume increase and starts trading at 1,500,000 this is a good indication this could be a green light.

One key note to really make sure and check into is. When a stock with low volume, but the stock is still going up in price, this is a yellow if not a red flag to be looking into. This means the stock is moving probably on news strictly and not really supply and demand. So the usually the winning stocks are the ones with a strong demand and then have the price increasing to follow.

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