Accumulation Area

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DEFINITION of 'Accumulation Area'

A price range in which investors typically purchase shares of a particular stock. The accumulation area is determined by looking at the volume and its corresponding price. It appears as a rectangle with a price line bouncing up and down between the upper and lower limits. According to technical analysts, stocks that hit the accumulation area presents an opportunity to buy because it is expected to attract more demand.

INVESTOPEDIA EXPLAINS 'Accumulation Area'

Investors use technical analysis techniques, such as the on-balance volume (OBV) method, to detect the momentum of a stock. If a stock doesn't seem to fall below a certain price, this can be a sign that the stock is in an accumulation area and may be more likely to attract more investors, allowing traders who see the trend to profit from increased buyer interest.

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RELATED FAQS
  1. How is accumulation area calculated?

    An accumulation area does not have a precise calculation. Accumulation areas are identified on price/volume charts as rectangular ... Read Full Answer >>
  2. How do I find the information needed for input into the Dividend Discount Model (DDM)?

    Analysts and investors should utilize a company’s financial statements, stock information websites and any number of analysis ... Read Full Answer >>
  3. What does the Dividend Discount Model (DDM) show an investor about a company?

    The dividend discount model, or DDM, is not designed to be used in forecasting any possible capital gains from increases ... Read Full Answer >>
  4. If a company has a high debt to capital ratio, what else should I look at before ...

    A variety of equity valuation metrics can be utilized to evaluate a company along with the debt to capital ratio to get a ... Read Full Answer >>
  5. How can a firm bring down its operating leverage?

    A company with a lower percentage of fixed costs and a higher percentage of variable costs uses less operating leverage. ... Read Full Answer >>
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    DuPont analysis determines profitability by measuring assets at their gross book value, which produces a greater return on ... Read Full Answer >>
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