Marshall,
IBD's accumulation/distribution rating is calculated over a rolling three month period. The money flow that I posted is published daily. When using technical analysis, it is important to consider whether you bought for a short term trade or for an investment. A few days of poor money flow, increasing volume, and flattening chart doesn't negate the longer term trend. These are caution flags for short term traders but might be best ignored by longer term investors. PLMD's weekly on-balance-volume is bullish, for example.
Money flow can be calculated either in units of volume or dollars. Money flow (volume) is calculated by subtracting the volume on down ticks from the volume on up ticks. Money flow (dollars) is calculated by subtracting the volume times trade price on down ticks from the volume times trade price on up ticks. Every trade requires a buyer and a seller, but a trade at the bid must be initiated by a seller and a trade at the ask must be initiated by a buyer. Money flow calculates the net buying or selling in a security on a given day. Negative money flow volume indicates that more shares were sold on down ticks than up ticks (distribution). Negative money flow in dollars is the net amount of money that left the security that day.
The money flow volume in PLMD on Friday was -188,700 shares on total volume of 712,400. Compared to previous days, the negative money flow as a percentage of the total volume is high. In addition, the absolute magnitude of the negative money flow was higher than any previous day going back to January 99. These aren't reasons to sell, but they do raise a red flag when combined with the other indicators that I noted. The money flow in dollars on Friday was -$3,022,389. This means that over $3 million left the security on Friday. The money flow volume has been negative eight of the past twelve trading days.
You mentioned the DMI and MACD so I thought I'd give you my thoughts on them. The DMI is a trend following indicator that many use to give buy and sell signals when the ADX line is above 50 and the +DI line crosses the -DI line in a particular direction. I haven't had much luck using it in this manner, and prefer to use it in conjunction with other indicators to increase the odds of predicting counter-trend moves. When the ADX line is above 70 and the +DI line is below 5 or 10, a short term counter trend rally may be at hand. Conversely, when the ADX line is above 70 and the -DI line is below 5 or 10, a short term counter-trend decline may be at hand. As of Friday's close, the DMI for PLMD was ADX = 70, +DI = 49, and -DI = 5. I have seen cases where the ADX line gets above 80 but this is rare. In addition, the best signals are given when the +DI and -DI line are furthest apart. The current difference of 44 is wide, but not extraordinary. In summary, the DMI is at a level that should make one cautious over the short term.
The daily MACD is positive, although it flattened the past two days. This is just signaling a loss of upwards momentum that can also be seen with the daily stochastic and RSI.
The best thing that could happen to PLMD from a longer term investment perspective is a consolidation on the daily chart without much price erosion. This would allow the daily technical indicators to correct and set the stage for a further advance in the stock price. On the other hand, nobody knows if the caution flags on the daily chart will eventually lead to caution flags on the weekly and monthly charts. This is what sets traders apart from investors and is purely a matter of investment style. If you are a long term investor, the fundamentals become much more important. As with any company, I think fundamental ratios such as price to sales, price to book, and price to earnings should be viewed in the context of expected future results rather than previous balance sheets and income statements.
Best of luck,
Dan |
