To maximize your chances of investing success, follow the "smart money" by tracking institutional demand. An easy to way do that is by using the new Ants Indicator on IBD MarketSurge.
The Ants Indicator identifies unusually strong price and volume action over a rolling three-week period. The indicator — developed by investing champ David Ryan while working as a portfolio manager at former IBD parent company William O'Neil + Co. — is a sign of unusually high institutional demand over a short period of time.
The bulk of trading in the stock market is done by institutions: mutual funds, hedge funds and other major investors with billions of capital to invest. While their public disclosures are usually limited to once per quarter, investors can use price and volume to gauge the institutional buying and selling in real time.
When stocks climb in rising volume, that's a hallmark of institutional demand. The Ants Indicator takes a magnifying glass to this concept.
How To Buy Stocks With The Ants Indicator
To trigger it, there are three requirements. First, the stock has to be up at least 12 of 15 consecutive days. At the end of that period, average volume needs to be up 20% or more from the beginning of the 15-day move. Lastly, the stock price needs to advance 20% or more from the start of that period.
The Ants Indicator will be marked on a daily chart by small black marks ("ants") right above the price bars on the days the signal occurs.
"It is not a signal to rush out and buy the stock," cautioned MarketSurge Manager Scott St. Clair. "After a consolidation or resting period, these stocks could be potential big winners for you to research."
So use the Ants Indicator as an easy to way to spot that overwhelming institutional demand that can result in big stock market winners.
Chipotle And Qualcomm Ants
Qualcomm triggered the Ants Indicator in mid-November, just a couple weeks before a breakout past a cup-with-handle's 130.37 buy point (1). On Nov. 16, 17 and 20, MarketSurge's mechanisms plotted the black markings on the daily chart (2).
The stock advanced as much as 36% from that entry through March 7. Qualcomm shares are now building another base.
In mid-November, Chipotle Mexican Grill broke out past a 2,175.01 buy point in a cup base. A single Ants Indicator appeared Nov. 16, an auspicious signal as the burrito chain began a run of about 50%.
Since then, shares have gone up substantially from that buy point. They rallied as much as 49% to the all-time highs on April 29.
Using Ants As A Sell Signal
But excessive buying can also indicate when a stock's price move has become exhausted. When the Ants Indicator shows up after a big price move, consider it a bearish signal.
For example, artificial intelligence leader Super Micro Computer started showing the Ants Indicator in mid-February after the stock had already gone on a tremendous advance from a 357 consolidation buy point.
That was a sign of climactic action. While not an immediate sell signal, it was time for investors to take some profits off the table and be on the lookout for additional sell signals.
Be sure to follow Scott Lehtonen on X, formerly known as Twitter, at @IBD_SLehtonen for more on growth stocks, the Dow Jones Industrial Average and the stock market today.
