• Institutional investors represent the bulk of trading activity in the market. As such, their buying and selling power can move a stock's price up or down dramatically.
   
  
• You can learn to spot which stocks institutions are buying and selling by watching for surges in trading volume and the Accumulation/Distribution Rating. Look for A and B stocks for buying opportunities; you should generally avoid D and E stocks.
   
  
• Look for stocks with an increasing total number of institutional owners in recent quarters. IBD's Sponsorship Rating boosts the ratings of those stocks that are owned by more funds each quarter.
   
  
• You can tell if the market is shifting to small- or big-cap stocks by watching the performance of small-cap growth fund vs. large-cap growth funds. It's also important to see if growth funds are outperforming value funds. IBD publishes charts to track these trends daily.

Related Resources:

Click here to get the 7 Steps For Selecting Winning Stocks, according to the CAN SLIMTM Investment Research Tool.

Go to the Investor's Corner Archives to read IBD's "editor picks" of classic Investor's Corner columns.

Search our archive of Ask Bill O'Neil Q & A's organized by topic.