How To Use The Accumulation/Distribution Rating To Find Stock Market Leaders

When Credicorp (BAP) soared 5.5% in the stock market Thursday, the heavy-volume gain helped improve its Accumulation/Distribution Rating to A- from B+. Credicorp normally trades close to 300,000 shares a day, but on Thursday volume more than doubled to 701,000 shares.

IBD’s Accumulation/Distribution Rating looks at a stock’s price and volume over the past three months of trading. Heavy volume on up days helps the rating, while heavy volume on down days hurts it. Stocks are rated on an A+ to E scale. A+ is the highest indication of institutional buying. E indicates heavy institutional selling.

Knowing if institutional investors are actively buying or selling a stock you’re researching is good information to have. Big volume always gives them away. It might be a hedge fund, a mutual fund, a pension fund or another large investor. Either way, it’s their buying and selling that can cause big imbalances to supply and demand. And that’s what moves a stock’s price — and its A/D Rating.

During stock market uptrends, stocks with the strongest A/D Ratings tend to rise in heavy volume and fall in light volume during their own uptrends.

The accompanying table lists a select group of stocks from Thursday’s IBD 50 index of top-rated growth stocks. As you can see, they all have top Composite Ratings, but very different A/D Ratings. It’s no surprise to see that Eli Lilly (LLY) has the highest-possible A/D Rating of A+, even after six straight pullbacks. But notice all the heavy volume on up days since late October after the stock soared past an 864.35 buy point.

Vertiv (VRT) is also interesting with a somewhat lowly A/D Rating of D-. It’s interesting because it’s compelling technically, back above its 10-week line and in the early stages of a new consolidation. Vertiv is also top-notch in terms of fundamentals as a leading provider of data-center cooling services. Vertiv’s A/D Rating is weighed down by some heavy-volume declines as the stock started to pull back in October. In addition, recent gains have come in very light volume.

Comfort Systems (FIX) might look lukewarm at C-, and it is. Several higher-volume drops since Oct. 10 weigh on the rating, but an earnings gap up on Oct. 24, a heavy-volume gain on Nov. 24, and Thursday’s heavy-volume gain help the rating. As of Thursday’s close, Comfort Systems was nearly six weeks into a new base.

Follow Ken Shreve on X @IBD_KShreve for more stock market analysis and insight.

YOU MAY ALSO LIKE:

Catch The Next Big Winning Stock With MarketSurge

Want To Get Quick Profits And Avoid Big Losses? Try SwingTrader

IBD Digital: Unlock IBD’s Premium Stock Lists, Tools And Analysis Today

How To Invest: Rules For When To Buy And Sell Stocks In Bull And Bear Markets