This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Aggressive Stock-Picking, Week 4: How to Trade Off of Unusual Activity

Editor's note: The Aggressive Stock-Picking Training Program is a series of six weekly assignments. To start with Week 1, click here . Each assignment is based on one of James Altucher's strategies in his book, Trade Like a Hedge Fund. To get a copy of the book, click here.

This assignment was written by Stockpickr member Ira Krakow.

Last week's assignment focused on how to trade stocks that are rising on unusual volume . To recap, unusual volume is one type of unusual stock activity that can hint at a large, sudden price increase. However, it's hardly the only one.

Many times, large outside shareholders may load up on a stock in anticipation of a big event, such as a merger , an acquisition or a major new order. Another harbinger of unusual activity is when a company announces a buyback .

With a buyback, if the shares are actually bought, that activity should help increase the stock price, because the number of shares available to the public will decrease. But this doesn't always occur immediately, and sometimes it does not occur at all. A company can announce a buyback program but not actually execute the buyback for a number of months, or years (see "Ask TheStreet: Buybacks" ).

For companies that have announced a stock buyback in the previous week, look at Stockpickr's Top Stock Buybacks . And for possible recent outsider activity (by "activist" investors), check out Stockpickr's Latest Activist Situations , which is a portfolio based on the mandatory "13D" filings that indicate that an outside investor has taken a major (greater than 5%) stake in the company. A big investor move like this could result in a shakeup in company management, and ultimately a boost for the stock price.

A recent activist situation took place with Freeport-McMoRan Copper and Gold (FCX). This month, Atticus Capital LP (see "Trade Like Hot Hedge Fund Atticus Capital" and "Atticus Proves Not All Hedge Funds Will Go Belly Up" ) disclosed that it raised its stake in Freeport-McMoRan to over 7% (the stock has steadily gone up since the disclosure). Even with FCX's year-to-date rise of around 30%, an increased stake by Atticus is a strong sign that the stock price can go a lot higher.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,678.70 +6.10 0.03%
S&P 500 2,057.09 +5.27 0.26%
NASDAQ 4,771.7630 +13.8840 0.29%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs