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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 Set to Soar on Bullish Earnings With that in mind, let's take a look at several stocks rising on unusual volume recently.
LKQ (LKQ), together with its subsidiaries, provides replacement parts, components and systems needed to repair vehicles, primarily cars and trucks in the U.S., the United Kingdom, Canada, Mexico and Central America. This stock closed up 2.9% at $26.71 in Wednesday's trading session.
Wednesday's Volume: 8.55 million
Three-Month Average Volume: 1.87 million
Volume % Change: 331%
From a technical perspective, LKQ spiked notably higher here with heavy upside volume. This stock has been downtrending badly for the last month and change, with shares moving lower from its high of $34.32 to its intraday low of $25.27. During that move, shares of LKQ have been consistently making lower highs and lower lows, which is bearish technical price action. That move has now pushed shares of LKQ into oversold territory, since its current relative strength index reading is 24.76. Oversold can always get more oversold, but it's also an area from which a stock can experienced a powerful bounce higher.
Traders should now look for long-biased trades in LKQ as long as it's trending above Wednesday's low of $25.27 and then once it sustains a move or close above Wednesday's high of $26.79 with volume that hits near or above 1.87 million shares. If we get that move soon, the LKQ will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $28.83 to $30, or even its 50-day moving average of $32.18.
Best Buy (BBY) operates as an e-commerce and physical retailer of consumer electronics in the U.S., Europe, Canada and China. This stock closed up 6.2% at $26.01 in Wednesday's trading session.
Wednesday's Volume: 23.72 million
Three-Month Average Volume: 8.15 million
Volume % Change: 216%
From a technical perspective, BBY spiked sharply higher here right off some near-term support at $24.25 with heavy upside volume. This stock recently gapped down sharply from $37.85 to below $28 with monster downside volume. Following that move, shares of BBY went on to print a new low at $24.25. That move has now pushed shares of BBY into oversold territory, since its current relative strength index reading is 21.65. Oversold can always get more oversold, but shares of BBY are already starting to rebound off those extreme levels. Market players should now look for a continuation rebound higher in the short-term if BBY can manage to take out Wednesday's high of $26.11 to its gap-down-day high of $28.20 with strong volume.
Traders should now look for long-biased trades in BBY as long as it's trending above its recent low of $24.25 and then once it sustains a move or close above $26.11 to $28.20 with volume that's near or above 8.15 million shares. If we get that move soon, then BBY will set up to re-fill some of its previous gap-down-day zone that started at $37.85. 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.