Trade the Same Stocks Institutional Investors Buy

When a stock is under accumulation, institutional investors are in the process of buying a stock. When a stock is under distribution, institutional investors are in the process of selling a stock.

Since institutional investors are the primary source of the movement of stocks up or down, it is important that any stocks you consider trading be undergoing strong accumulation. Strong accumulation indicates a stock has a following on Wall Street.

Large institutions such as insurance companies, brokerage houses, and mutual funds will often buy a stock for some time well in advance of a big move, and will often add a substantial number of shares on the day the stock is in the process of making a big move, which shows up as explosive volume.

Investors Business Daily uses a price and volume formula to gauge whether a stock is under accumulation or distribution in the last 13 weeks. The scale goes from A to E, A representing heaving buying, and E, heavy selling. You usually want to stick to stocks that have a B- or better ranking.