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.
Zafgen (ZFGN) - Get Zafgen, Inc. Report , a biopharmaceutical company, focuses on the provision of therapeutics for patients suffering from obesity and obesity-related disorders. This stock closed up 3.4% at $19.82 in Wednesday's trading session.
Wednesday's Volume: 112,000
Three-Month Average Volume: 67,058
Volume % Change: 85%
From a technical perspective, ZFGN spiked higher here right above its 50-day moving average of $18.78 with above-average volume. This move to the upside on Wednesday is quickly pushing shares of ZFGN within range of triggering a near-term breakout trade. That trade will hit if ZFGN manages to take out some near-term overhead resistance at $19.95 with high volume.
Traders should now look for long-biased trades in ZFGN as long as it's trending above its 50-day moving average of $18.78 and then once it sustains a move or close above $19.95 with volume that hits near or above 67,058 shares. If that breakout materializes soon, then ZFGN will set up to re-test or possibly take out its next major overhead resistance level at its all-time high of $21.96. Any high-volume move above $21.96 will then give ZFGN a chance to tag $25.
Neurocrine Biosciences (NBIX) - Get Neurocrine Biosciences, Inc. Report discovers, develops and commercializes drugs for the treatment of neurological and endocrine-related diseases and disorders in the U.S. This stock closed up 5.7% at $15.97 in Wednesday's trading session.
Wednesday's Volume: 723,000
Three-Month Average Volume: 520,738
Volume % Change: 85%
From a technical perspective, NBIX ripped sharply higher here right above both its 50-day moving average of $14.92 and its 200-day moving average of $14.88 with above-average volume. This sharp move to the upside on Wednesday is starting to push shares of NBIX within range of triggering a big breakout trade. That trade will hit if NBIX manages to take out some near-term overhead resistance levels at $16.73 to $17 with high volume.
Traders should now look for long-biased trades in NBIX as long as it's trending above its 200-day at $14.88 or above more near-term support at $14.78 and then once it sustains a move or close above those breakout levels with volume that's near or above 520,738 shares. If that breakout triggers soon, then NBIX will set up to re-test or possibly take out its next major overhead resistance levels at $18 to $19, or even its 52-week high at $20.29.
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.