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DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.
Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."
Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.
>>5 Stocks Poised for Breakouts With that in mind, let's take a look at several stocks rising on unusual volume recently. Momenta Pharmaceuticals
Momenta Pharmaceuticals (MNTA), a biotechnology company, is engaged in the structural characterization, process engineering and biologic systems analysis of complex molecules in the areas of complex generics, biosimilars and novel drugs. This stock closed up 1.2% at $11.25 in Friday's trading session.
Friday's Volume: 1.60 million
Three-Month Average Volume: 790,400
Volume % Change: 125%
From a technical perspective, MNTA bounced modestly higher here off its new 52-week low of $10.63 with above-average volume. This stock has been downtrending badly for the last three months, with shares plunging lower from its high of $19.90 to its low of $10.63. During that downtrend, shares of MNTA have been making mostly lower highs and lower lows, which is bearish technical price action. That slide has now pushed shares of MNTA into oversold territory, since its current relative strength index reading is 27.57. Oversold can always get more oversold, but it's also an area where a stock can bounce sharply higher from.
Traders should now look for long-biased trades in MNTA as long as it's trending above its 52-week low of $10.63 and then once it sustains a move or close above Friday's high of $11.31 to more near-term overhead resistance at $12.13 with volume that hits near or above 790,400 shares. If that move starts soon, then MNTA will set up to re-test or possibly take out its next major overhead resistance levels at $14 to $14.50. Potbelly
Potbelly (PBPB), through its subsidiary Potbelly Sandwich Works, owns and operates Potbelly Sandwich Works sandwich shops in the U.S. This stock closed up 4.7% at $17.94 in Friday's trading session.
Friday's Volume: 1.86 million
Three-Month Average Volume: 461,205
Volume % Change: 327%
From a technical perspective, PBPB jumped sharply higher here right above its recent 52-week low of $17 with heavy upside volume. This stock has been downtrending badly for the last five months, with shares plunging lower from its high of $32.57 to its low of $17. During that downtrend, shares of PBPB have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of PBPB are starting to bounce off its 52-week low at $17 and off of oversold levels, since its current relative strength index reading is 37.05. Oversold can always get more oversold, but PBPB is starting to see strong upside volume flows, which could mean a big bounce higher is coming.
Traders should now look for long-biased trades in PBPB as long as it's trending above its 52-week low of $17 and then once it sustains a move or close above Friday's high of $18.73 to more resistance at $19 with volume that's near or above 461,205 shares. If that move materializes soon, then PBPB will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $20.44 to $21.50. Any high-volume move above those levels will then give PBPB a chance to tag $23. To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.
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At the time of publication, author had no positions in stocks mentioned.
Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.