Float Analysis: Powerful Technical Indicators Using Price and Volume
by Steve Woods
Quick Summary
A technical analysis guide focused on float-based indicators, teaching traders how to use a stock's tradable share float in conjunction with volume and price data to identify accumulation/distribution patterns, breakout points, and trend reversals. The book introduces proprietary metrics like Float Turnover and Float Channel indicators.
Categories
- Technical Analysis
- Volume Analysis
- Trading Systems
Detailed Summary
"Float Analysis: Powerful Technical Indicators Using Price and Volume" by Steve Woods, published in 2002 by John Wiley & Sons as part of the Marketplace Books series, presents a unique approach to technical analysis centered on the concept of stock float - the number of shares available for public trading. Woods argues that understanding float dynamics provides a significant informational edge that traditional technical indicators fail to capture.
The book's foundational premise is that when the cumulative trading volume equals a stock's float, a meaningful price event is statistically likely to occur. This concept, termed "Float Turnover," posits that once all available shares have theoretically changed hands, the market reaches a psychological inflection point where the balance between buyers and sellers shifts. Woods demonstrates this principle across multiple timeframes and market conditions, using historical examples from stocks like Applied Materials (AMAT), Wet Seal (WTSLA), and numerous other equities.
Woods introduces several proprietary indicators built on float analysis. The Float Turnover indicator tracks cumulative volume against the known float size, generating signals when total volume traded equals the float. The Float Channel indicator creates dynamic support and resistance levels based on the volume-weighted average price calculated over a period equal to one float turnover. These channels adapt to changing market conditions because the float itself changes over time through secondary offerings, buybacks, insider transactions, and options exercises.
The methodology distinguishes between different types of float turnovers: those occurring at absolute tops, absolute bottoms, intermediate tops, and intermediate bottoms. Woods provides extensive charted examples showing how breakout trading points within bottom and top formations correspond to float turnover completion. He demonstrates that base formations in rising trends can be identified through float analysis, with the base of support often forming precisely at the price level where one complete float turnover occurs.
A significant portion of the book addresses the practical challenges of float analysis, including how to obtain accurate float data, how to account for changes in float over time, and how to interpret float turnover signals in different market environments. Woods discusses the distinction between the total shares outstanding and the tradable float, noting that institutional holdings, insider shares, and restricted stock must be subtracted to arrive at the true tradable float.
The book also integrates float analysis with traditional volume analysis, showing how On Balance Volume (OBV), accumulation/distribution lines, and volume rate of change can be enhanced by normalizing them against float data. This normalization provides context that raw volume numbers lack, since a million-share day means something fundamentally different for a stock with a 5-million-share float than for one with a 500-million-share float.
Woods provides appendices containing numerous annotated charts demonstrating float analysis patterns across different sectors and market capitalizations. The work represents a relatively specialized but innovative contribution to technical analysis, offering tools that complement rather than replace traditional price and volume indicators.
