Like detectives following a suspect's footprints, savvy investors know it's important to read the clues the market is giving. One of the biggest can be found in answering the question: Are institutional investors-the mutual funds, pension funds, hedge funds and other big players that can move stock prices-buying or selling?

Institutional investors leave large footprints in their wake, and that shows up in a stock's trading volume and price.

What to look for

Institutions can keep a stock's price high by snapping up shares as others in the market sell, creating what's called support in a stock. Likewise, institutions want to sell shares when demand is still hot and before the larger market catches on, keeping prices from rising above certain levels. This is called resistance.

Volume is the first important clue because it points to the big amounts of money only institutional investors can wield. But it's also imperfect, particularly in a market crowded with everything from exchange-traded funds to high-frequency traders that can be heavy traders without necessarily making a major move.

That's why it's important to also consider the stock's price and trading range. One useful gauge is a stock's up/down volume ratio, which takes a stock's volume on up days and divides it by volume on down days over a 50-day period. A resulting ratio of 2.0 means twice as much up volume occurred on up days as down days, and a ratio below 1.0 points to heavier volume on down days. A neutral ratio of 1.0 points to churn, where neither buyers or sellers are influencing the stock.

Here's where it all comes together. When institutions are buying shares, that action keeps prices at or above a floor of support over a period. The stock tends to finish in the higher end of its weekly price range, and the volume will also be much higher than normal. This is called accumulation.

Flash memory and data-storage company Sandisk provided a good example of accumulation earlier this year. The stock had an impressive run and shares closed near the top of their trading range during the week ended Jan. 6 on heavy volume. This pattern was repeated for several consecutive weeks. The stock pulled back in March, but that was accompanied by lower volume, indicating that institutions were taking a break from buying, and not necessarily selling.

After the pullback, the buying clues reappeared. Sandisk has rocketed more than 500% this year overall amid the artificial-intelligence boom.

Conversely, when a stock stays lower despite increased trading volume, it can be a sign that institutions see a stock as overvalued and are eager to sell even as demand remains strong from other investors. This is called distribution.

Trade Desk, an advertising technology company, showed these signs in early 2025 as its newest ad platform received a tepid response from its clients. For several weeks, the stock consistently closed near the lows of its trading range, together with above-average trading volume.

The institutional moves presaged a broader ad-market pullback that accelerated Trade Desk's stock-price decline throughout 2025. Shares are now trading at less than one-tenth the stock's $141 peak from December 2024.

The concept even lends itself to broader markets. A distribution day occurs when the S&P 500 or Nasdaq closes 0.2% lower or more on higher volume. One distribution day doesn't necessarily mean trouble, but many distribution days in a short period is an early warning that institutions are bailing out of the market.

Capitalizing on the clues

Investors don't have to calculate these patterns themselves. Tracking accumulation and distribution can be automated through everyday indicators found in stock-charting tools. Some can help find a stock's average trading volume, making it easy to spot the spikes in volume that institutions leave. Some more-sophisticated tools can give ratings or create trend lines pointing to buying momentum or selling pressure.

Ultimately, by scrutinizing price ranges and volume, investors can glean how institutional investors feel about a stock's prospects. Then they can add to successful positions or take risks when they know the bulls are behind them-or pull back when things turn bearish.

Write to reports@wsj.com