Key Concepts and Definitions of Float Charts and Float Analysis

Key Concepts and Definitions

Float  /  Floating supply of shares
1) The shares actually available for trading.  Shares outstanding minus ownership by insiders. 
2) The number of shares of a corporation that are outstanding and available for trading by the public, excluding insiders or restricted stock on a when-issued basis.   A stock's volatility is inversely correlated to its float. 
3) The aggregate of securities believed to be available for immediate purchase, that is, in the hands of dealers and investors wanting to sell.

Float numbers for all companies are found at a variety of public sources including Investors.com, Yahoo Finance, Multex, and ClearStation. To find a company's float number, go to Investors.com home page (in the upper right hand corning there is a box that says Enter Symbol/Keyword) type in a company symbol.  A data table will come up which includes the float number. 

Float Turnover – (a term created by Steve Woods) a unit of measurement in the technical analysis of stocks where the cumulative total of shares traded equals the number of shares available for trading (the float), thus implying a change of ownership in the stock. The float turnover is identified on price and volume charts as a rectangle which is known as the Float Box (see below). A Float Box shows the amount of time it takes for a specific number of shares to trade that equals the number of shares in the company's float and the price range of same. For example, if a company's cumulative trading volume over the past year was 10 million shares and that same company has 10 million shares in its float, then its float turnover would be a one year span. If during that time the stock traded between $80 and $100, then its Float Box would be seen on the chart as a rectangle that was one year in length with the top of the box at $100 and the bottom of the box at $80. A float turnover shows the shortest amount of time for a company’s market capitalization to actually be realized. Float turnovers constantly change in much the same way as a moving average. New volume gets added into the count each day and the distance going back to the end of the float turnover changes often as well. Float turnovers serve as a "proxy" for a theoretical change in the ownership of a company. When used as a proxy for a change in ownership, float turnovers are by definition imprecise. The reason for this is that the analyst can never be certain how great a percentage of the float has actually traded hands in any particular time frame. In Float Analysis Theory, certain float turnover formations combined with strong price action show when a stock's shares are being tightly held thus giving rise to large moves in price.  

PLEASE NOTE: As of February 1, 2001 Nasdaq implemented the "Riskless Principle Rule" which eliminates all double counting of shares. The NYSE, AMEX and the NASDAQ now all count volume in the same manner. One hundred shares traded is counted as 100 shares in the volume.

The Float Box (originally known as the Woods Cumulative-Volume Float Indicator / WCVFI), and written about as the Precision Profit Float Indicator.  It is a stock indicator that tracks float turnovers by adding volume numbers cumulatively in a reverse chronological direction on a day to day basis.  Two lines are added to reference the highest and lowest prices reached during the float's turnover. These lines also serve as trigger lines that alert us to buy and sell signals. Created by Steve Woods and Jan Arps.  (Editors Note: Originally, the float box was two lines and a dot which have now evolved into a simple box. The dot was used to reference the bar in the past which signified the back end of the box.  The dot has been removed as it is not needed to see the float box's dimensions.) 

The Float Channel Lines (originally known as the Woods Cumulative-Volume Channel / Historical Indicator) - This indicator is derived from the WCVFI. It plots the highest and lowest price range point of the current float turnover box on a bar to bar basis. Thus it creates channel lines that show wherever the price breaks above or below an existing float turnover.

Since float turnovers formations change from day to day much like a moving average, I always plot both the Float Box and the Float Channel indicators together. This allows me to see the present float turnover in relation to past float turnovers so that multiple float turnovers bases are easily identified. 

The 50% Float Channel Lines
Whereas the normal Float Channel lines are created using the upper and lower right hand corners of the normal Float Box, these lines are based off of a Float Box that uses only half the float number.  Thus if a stock has a float of 100 million shares, its 50% float channel lines are created by using the upper and lower right hand corners of a Float Box that uses 1/2 the float value or 50 million shares. 

The 25% Float Channel Lines
These lines are created in the same way as the 50% Float Channel lines except the value used to create the Float Box from which they are plotted is 25% of the float.  Thus in the example above the float box used would be created using 25 million shares as the float value.

Float Rank (for Individual Stocks) – tells us where the stock’s current price is in relation to its current float turnover price range. The ranking is from 1 to 100. For example, if a stock’s current price is $25 and its float turnover price range has a high of $30 and a low of $20. Its float rank would then be 50 because its price is half way between $30 and $20. If the price was $30 then it would receive a ranking of 100 and if its price was $20 then it would be ranked a 1. Stocks with high float ranks will be the leaders in a bull market as their price is always near the top of the float turnover range. Stocks with low float ranks will be the laggards in a bull market as their price is always near the bottom of their float turnover range.

Bull/Bear Float Rank - The purpose of this indicator is to help the user identify broad market bottoms and tops. The Bull/Bear Float Rank number is plotted on a scale between 1 and 100 and is generated at the close of every market day and is plotted on a chart at the close of every week. To get the daily number, we add up the individual Float Ranks (see the Float Rank for Individual Stocks definition above) of all the stocks in the broad market. We then divide the sum by the total number of stocks in the universe and get an average float ranking. This average float ranking of all the stocks in the FloatCharts universe is the Bull/Bear Float Rank.

Interpreting the Bull/Bear Float Rank - The broad market repeats itself, alternating between bottoms and tops. This can be seen on the Bull/Bear Float Rank with readings near 70 at tops and near 30 at bottoms. Thus it is most useful at the extremes. In markets that have made a top and are correcting lower there is generally a bounce at the 50% point level. When the broad market is correcting lower from making a top, it is common to see support come in at or near the 50% level.

Float Charts™
A holistic stock chart that uses all four available pieces of stock data: float, price, volume and time. See expanded definition.

Float Analysis™  
A new method of technical stock analysis developed by Steve Woods. It is based on a little known idea in the writings of W.D. Gann (See Origins of Float Analysis - below). It is the study of float turnover formations, for the purpose of making more informed buying and selling decisions by analyzing areas of accumulation/support and distribution/resistance.

The Origins of Float Analysis
W.D. Gann in his book Truth of the Stock Tape stated several times that it was important to study a stock's volume in relation to the number of shares actually being traded. The following quotes contain this fascinating idea: "It is always important to watch the volume of sales daily, weekly and monthly and consider the total shares outstanding of the stock that you are watching." "The volume on the advance from 116 5/8 up to 139 3/8 amounted to 1,600,000 shares, which was nearly three times the total capital stock outstanding and probably five or six time the floating supply of shares." and "…when the stock was nearly 100 points higher, the capital stock was changing hands about twice each week." Based on these statements, Steve concluded that Gann had added volume numbers cumulatively and recognized distances on his charts in which the float had gone through a turnover thus implying a change in ownership and helping one to determine areas of distribution and accumulation.