Float analysis allows us to create a model of price,volume,and tradeable shares activity. As a model it does not claim to be the “truth”of all stock price and volume activity.
It is, of course, just one point of view among many. But Like any valid model, it has the ring of truth; and to all who listen, float analysis rings rather loudly. Its appeal as a model of stock behavior is threefold. First, it is based on several discoveries that are easy to understand. Second, it is backed up by hard data.And third, it makes common sense.
Float analysis is a holistic approach to studying the technical behavior of stocks. By this Steve Woods means it treats the shares actually being traded as equal in importance to price and volume activity. Thus, price and volume are seen as only two-thirds of the picture,with the number of shares actually traded being the final third that completes the picture.
The power of looking at stocks this way is that it demonstrates a direct relationship between the volume of shares traded in the past and subsequent future movements in price. Thus, float analysis is a powerful tool to predict future stock price movements.
In addition, by studying stocks holistically, float analysis expands and clarifies the definition of several technical terms. These include bottoms and tops, support and resistance, and accumulation and distribution.
The first and most important discovery, made in 1993, is a simple concept with profound implications. In order to understand this discovery,we need to know two key terms: float and float turnover. The float is well known to knowledgeable market players.
- Watching the Float: The New Look of Price and Volume Charts and Their Relationship to a Stock’s Future Price Direction
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- Technicals 101: How to Understand—and Profit from—the Indicators
- Support and Resistance Redefined: Creating a Model of Stock Behavior That Brings Results
- Successful Strategies That Made My Stock Portfolio Grow Tenfold in Sixteen Months