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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. Monolithic Power Systems
Monolithic Power Systems (MPWR), a fabless semiconductor company, designs, develops and markets analog and mixed-signal semiconductors for storage and computing, consumer electronics, communications and industrial/automotive markets. This stock closed up 4.4% at $38.77 in Monday's trading session.
Monday's Volume: 683,000
Three-Month Average Volume: 284,911
Volume % Change: 133%
From a technical perspective, MPWR trended sharply higher here right off some near-term support at $37 with above-average volume. This stock has been uptrending strong for the last two months, with shares moving higher from its low of $30.79 to its recent high of $39.16. During that uptrend, shares of MPWR have been consistently making higher lows and higher highs, which is bullish technical price action. This spike higher on Monday is quickly pushing shares of MPWR within range of triggering a near-term breakout trade. That trade will hit if MPWR manages to take out Monday's high of $38.83 to its 52-week high at $39.16 with high volume.
Traders should now look for long-biased trades in MPWR as long as it's trending above support at $36.56 or above its 50-day at $35.56 and then once it sustains a move or close above those breakout levels with volume that hits near or above 284,911 shares. If that breakout gets underway soon, then MPWR will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $45 to $50.
Level 3 Communications
Level 3 Communications (LVLT), together with its subsidiaries, operates as a facilities-based provider of a range of integrated communications services primarily in North America, Latin America, Europe, the Middle East and Africa. This stock closed up 1.6% to $39.14 in Monday's trading session.
Monday's Volume: 3.01 million
Three-Month Average Volume: 1.68 million
Volume % Change: 75%
From a technical perspective, LVLT rose modestly higher here with above-average volume. This stock has been uptrending over the last month, with shares moving higher from its low of $36.09 to its recent high of $39.69. During that move, shares of LVLT have been finding buying interest right above its 50-day moving average and it's now quickly moving within range of triggering a near-term breakout trade. That trade will hit if LVLT manages to take out Monday's high of $39.38 to its 52-week high of $39.69 with high volume.
Traders should now look for long-biased trades in LVLT as long as it's trending above some near-term support at $37.56 or above its 50-day at $36.48 and then once it sustains a move or close above those breakout levels with volume that hits near or above 1.68 million shares. If that breakout gets underway soon, then LVLT will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $45 to $50. 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.