2 Oversold Stocks That Could Bounce Higher

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.

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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.

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With that in mind, let's take a look at several stocks rising on unusual volume today.

Onconoca Therapeutics

Onconoca Therapeutics ( ONTX) is engaged in the discovery and development of small-molecule product candidates for the treatment of cancer. This stock closed up 6.3% to $16.68 in Monday's trading session.

Monday's Volume: 388,000
Three-Month Average Volume: 141,960
Volume % Change: 175%

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From a technical perspective, ONTX bounced sharply higher here right above its recent low of $15.12 with above-average volume. This stock has been downtrending badly for the last month, with shares plunging lower from its high of $31.13 to its 52-week low of $15.12. During that drop, shares of ONTX have been consistently making lower highs and lower lows, which is bearish technical price action. That move has now pushed shares of ONTX into oversold territory, since its current relative strength index reading is 26.41. Oversold can always get more oversold, but it's also an area a stock can experience a powerful bounce higher from.

Traders should now look for long-biased trades in ONTX as long as it's trending above its 52-week low at $15.12 and then once it sustains a move or close above Monday's high of $16.95 with volume that hits near or above 141,960 shares. If we get that move soon, then ONTX will set up to re-test or possibly take out its next major overhead resistance levels at $20 to $22, or even its 50-day moving average of $24.38.

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