Bed Bath & Beyond

Volume Scans Identify Potential Winners / Losers

Stock scanners are nothing new to most of us yet many investors don't know how to effectively use them. 

On the the basic tenants of the Elliott Wave Principle, is wave personality.  One criteria that you should become familiar with is "volume signatures" that are associated with both impulsive and corrective structures. 

Using Volume Scans

When applying the wave principle, I like to run volume scans using three sets of criteria:

1) Daily Volume Greater than 50% - I use this scan to identify stocks that may exhibit bullish/bearish 1st waves. 

2) Daily Volume Greater than 200% -  I use this scan to identify stocks that may exhibit bullish/bearish 3rd waves. 

3) Weekly Volume Greater than 50% - I use this scan to monitor institutional support or lack thereof for stocks. 

Volume Scan - 9/18/2012

Bed Bath & Beyond Inc. (NASDAQ: BBBY) is a chain of domestic merchandise retail stores. The stock showed up in a scan for stocks showing daily volume greater than 200%.

Accordingly, I'm looking for 3rd wave price action.  

On August 19, 2012, Bed Bath and Beyond Inc. reported earnings of 98 cents per share for the period ended Aug. 25. That fell short of the $1.03 per share that analysts surveyed by FactSet expected.

Shares of Bed Bath and Beyond dropped sharply in premarket trading on Thursday, August 20, 2012 as the housewares company's second-quarter earnings disappointed and it provided a weak third-quarter forecast.

As you can see from the chart that the handwriting was already on the wall as the corrective phase from 6/26/2012 to 9/17/2012 appears to be complete. The high volume signature on 9/18/2012 had this stock on my watch list as a candidate that should exhibit further downside pressure. 

At the weekly chart level, the decline from 6/29/2012 began after what appears to be an ending diagonal which typically warns of a very swift reversal. That's exactly what transpired. 

As of the time of this post, price action appears to exhibit the personality of a third wave which is being confirmed by the acceleration of price to the downside. If my assessment and use of volume signatures is correct, price should fall well below $58.77. 

Reading the Chart

Should the wave pattern prove to be only a corrective three waves, then  I'm looking for a move to $54.54 with much greater potential to the downside should a five wave decline play out.

In conclusion, I hope that readers can see how I use volume scans to identify possible trades. before the larger move occurs. 

Best of Trading  

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The Market Pulse

What a day today was. This daily chart level of the $SPX shows that the decline gained momentum, as measured by by the ROC. Volume was the highest since 5/2010 and has been increasing from 1346.1, a clear sign that institutions are dumping shrs (distribution days) at an alarming rate.  In such cases, one doesn't want to be in front of that train wreck.

Here is the chart I showed in this weekends video. I  had mentioned that I was taking a more conservative approach by using a less aggressive wave count and that I didn't think that the market would make another low UNLESS the move was a fake out.

Clearly, the failure of the market to make a larger w.4 bounce indicates that a more aggressive count is in order. W.3 red is the extended wave of w.(1) {not complete or shown} but determining which wave is extended within w.3 of w.(1) is practically impossible to identify at this juncture. My best guess, is that the market is still subdividing within a 3rd of w.3 as the past two trading sessions were the steepest declines and traveled the greatest distance in the least time. The technicals show above seem to confirm this opinion.

BOTTOM LINE: As soon as I can identify a significant turn, I'll discuss it's implications as well as provide an updated wave count. Until then expect the market decline to continue, even though it's severely oversold. 

Best of Trading