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.
Applied Optoelectronics (AAOI) - Get Report designs and manufactures optical communications products for cable television, fiber-to-the-home , and Internet data centers. This stock closed up 8.2% to $21.20 in Wednesday's trading session.
Wednesday's Volume: 668,000
Three-Month Average Volume: 232,445
Volume % Change: 175%
From a technical perspective, AAOI ripped sharply higher here right above its 200-day moving average of $19.05 and back above its 50-day moving average of $20.97 with strong upside volume flows. Market players should now look for a continuation move to the upside in the short-term if AAOI manages to clear Wednesday's intraday high of $21.49 and then above some near-term resistance at $22 with high volume.
Traders should now look for long-biased trades in AAOI as long as it's trending above its 200-day at $19.05 and then once it sustains a move or close above $21.49 to $22 with volume that hits near or above 232,445 shares. If that move gets underway soon, then AAOI will set up to re-test or possibly take out its next major overhead resistance levels at $23.23 to $24.10, or even $25 to $26.
Wednesday's Volume: 724,000
Three-Month Average Volume: 508,886
Volume % Change: 110%
From a technical perspective, ANET exploded higher here right above some near-term support at $75 with strong upside volume flows. This strong spike to the upside on Wednesday also pushed shares of ANET into new all-time-high territory, since this stock took out some key overhead resistance levels at $79.88 to $80.53. Market players should now look for a continuation move to the upside in the short-term if ANET manages to clear its new all-time high at $83.47 with strong volume.
Traders should now look for long-biased trades in ANET as long as it's trending above $80.53 or above $79.88 and then once it sustains a move or close above $83.47 with volume that's near or above 508,886 shares. If that move gets started soon, then ANET will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that move are $90 to $95.
Varonis Systems (VRNS) - Get Report provides software solutions for enterprises to map, analyze, manage and migrate their unstructured data. This stock closed up 7.7% to $22.13 in Wednesday's trading session.
Wednesday's Volume: 459,000
Three-Month Average Volume: 146,492
Volume % Change: 181%
From a technical perspective, VRNS ripped sharply higher here right off some near-term support at $20 with strong upside volume flows. This sharp move to the upside on Wednesday also pushed shares of VRNS into breakout territory, since the stock took out some near-term overhead resistance at $21.60. This move is now starting to push shares of VRNS within range of triggering another big breakout trade. That trade will hit if VRNS manages to clear its 50-day moving average of $23.23 and then once it clears more key overhead resistance at $24.29 with high volume.
Traders should now look for long-biased trades in VRNS as long as it's trending above some key near-term support levels at $20 or at $19.21 and then once it sustains a move or close above those breakout levels with volume that hits near or above 146,492 shares. If that breakout begins soon, then VRNS will set up to re-test or possibly take out its next major overhead resistance levels at $30 to $31.50.
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.