Posts Tagged ‘Deliverable Quantity’

Volume Analysis – many missteps

July 29, 2010 1 comment

I have heard and read that volume is the most important factor, the price momentum will be sustained only if the volume is present, meaning trade volumes are more than average.

I was analyzing this stock called SELMCL (SEL Manufacturing Company Ltd) (will post detailed analysis later) I had a look at its chart, specifically its price/volume action over time:

As you can see, you can see a huge spurt in volume in the recent months. As you can imagine this volume spurt may be “interesting”? “Interesting” is what I thought initially.

But I realized it may be better to look at “Deliverable Quantity (gross across client level)” to get an idea about the real investor interest. This factor would have told me how many shares were actually traded for delivery

I constructed a graph using AmiBroker with Deliverable Quantity substituted for Volume:

Again you can see a huge spurt, but wait; if you observe, this is not the real picture either, as the total outstanding shares of the company have been increasing through-out the time period. You can observe it by looking at the share-holding pattern for the share on NSE:

End of 2007:                    15216000
End of 2008:                    17166000
End of 2009:                    24657000
Current (As of Mar 2010):       30357000

There has been almost a three-fold increase in the number of outstanding shares as compared to 2007. This might due to a variety of reasons including exercise of preferential rights, stock options.

Then I plotted price against “% of Deliverable Quantity to Traded Quantity”; I just rounded-off the percent, and here is Amibroker chart:

So actually I perceive that there has not been any significant action on the volume front, if take into account “% of Deliverable Quantity to Traded Quantity”. So I am still not sure about how to interpret volume.

I will post a detailed analysis of SELMCL later.