Friday, January 29, 2010

Tracking the Market With Individual Stocks

If you click on this screenshot from my trading station, you'll see the 40 stocks in my basket: five from the eight S&P 500 sectors that I track regularly.

If the price change is green, that tells me that the stock is up on the day *from its opening price*.

I also compare the current stock price to its volume weighted average price (VWAP) and see how many stocks are trading above and below VWAP.

Both perspectives are useful in gauging whether trading days are shaping up as trend days or range ones.

Early in the day, when I saw that an increasing number of the stocks were trading up from their open and above their VWAP, I was able to scramble out of a short position without damage. Many times, individual stock action can illuminate what's going on in the broader indexes.