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.
With that in mind, let's take a look at several stocks rising on unusual volume recently.
Ligand Pharmaceuticals (LGND - Get Report), a biotechnology company, acquires and develops royalty revenue generating assets in the U.S. This stock closed up 5.1% at $51.65 in Wednesday's trading session.
Wednesday's Volume: 588,000
Three-Month Average Volume: 301,981
Volume % Change: 90%
From a technical perspective, LGND ripped higher here right above some near-term support at $48.67 with above-average volume. This stock has been downtrending badly for the last few weeks, with shares moving lower from its high of $65.66 to its recent low of $48.67. During that move, shares of LGND have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of LGND are now starting to rebound higher off that $48.67 low and it's quickly moving within range of triggering a near-term breakout trade. That trade will hit if LGND manages to take out Wednesday's intraday high of $52.07 to just above $54 with high volume.
Traders should now look for long-biased trades in LGND as long as it's trending above Wednesday's low of $49.31 or above that recent low of $48.67 and then once it sustains a move or close above those breakout levels with volume that's near or above 301,981 shares. If that breakout triggers soon, then LGND will set up to re-test or possibly take out its next major overhead resistance levels at $57.50 to its 200-day moving average of $61.30.