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
-- 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
) is a manufacturer and distributor of nitrogen and phosphate fertilizer products in North America. This stock closed up 11.7% at $202.32 in Monday's trading session.
Monday's Volume: 5.65 million
Three-Month Average Volume: 899,814
Volume % Change: 484%
Shares of CF soared higher on Monday after billionaire Dan Loeb's Third Point Management revealed a position in the firm in its quarterly investment letter. Loeb told investors the company trades at an unwarranted discount to its peers and that it expects management to deliver a much larger dividend to shareholders.
From a technical perspective, CF soared higher here back above both its 50-day at $184.76 and its 200-day at $198.52 with monster upside volume. This move pushed shares of CF into breakout territory, since the stock took out some key overhead resistance levels at $187.60 to $191.52 and then above $196.25 to $196.97. Shares of CF are now quickly moving within range of triggering another major breakout trade. That trade will hit if CF manages to take out some past overhead resistance at $208.17 with high volume.
Traders should now look for long-biased trades in CF as long as it's trending above its 200-day at $198.52 or above $197 and then once it sustains a move or close above Monday's high of $202.77 to $208.17 with volume that hits near or above 899,814 shares. If that breakout triggers soon, then CF will set up to re-test or possibly take out its next major overhead resistance levels at $220 to $225.
Keep in mind that CF is set to report earnings on Aug. 6 after the market close. Look to play that breakout before and then after earnings, once you know that the stock is reacting positively to the numbers.
) is engaged in the production and sale of specialty chemicals and specialty materials. This stock closed up 1.7% at $76.70 in Monday's trading session.
Monday's Volume: 2.54 million
Three-Month Average Volume: 613,848
Volume % Change: 323%
From a technical perspective, GRA bounced notably higher here right above its 200-day moving average of $73.85 with above-average volume. This stock recently plunged lower from $87.56 to its intraday low of $74.46 with heavy downside volume flows. That drop pushed shares of GRA into oversold territory, since the stock has a current relative strength index reading of 29.61. Oversold can always get more oversold, but it's also an area where a stock can experience a powerful bounce higher from.
Traders should now look for long-biased trades in GRA as long as it's trending above its 200-day at $73.85 and then once it sustains a move or close above Monday's high of $78.15 with volume that's near or above 613,848 shares. If we get that move soon, then GRA will set up to re-test or possibly take out its next major overhead resistance levels at $82 to its 50-day at $83.20. Any high-volume move above its 50-day will then give GRA a chance to tag $85 to $86.
To see more stocks rising on unusual volume, check out the
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
. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.