Low Accumulation Rating Can Spot Diminishing Demand.(MAKING MONEY)(INVESTOR'S CORNER)

Byline: DAVID SAITO-CHUNG

It always pays to watch out for stocks that build decoy bases.

A stock may appear to possess price strength. The decline from the base's high to low may be modest, suggesting plenty of institutional demand.

Or is demand actually lacking?

There is only one way to tell -- a chart that shows changes in both price and volume. As you analyze a stock's base, search for clues of heavy buying by institutional investors, such as mutual funds. This appears in the form of solid price gains, on both a daily and weekly basis, on huge volume spikes. These big players give a stock fuel for long-term gains.

But a stock that completes its base on weak trade is likely seeing waning demand for shares. This can spell trouble, since more investors may be willing to sell, not buy.

IBD has a simple-to-use tool to help confirm your analysis. The Accumulation/Distribution Rating tracks institutional activity by studying all intraday price-and-volume action in a stock over the past 13 weeks. It's a more timely measure of recent action than IBD's Relative Price Strength Rating, which covers 12-month performance.