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.
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.
Encore Wire (WIRE) manufactures and supplies electrical building wires and cables for use in interior electrical wiring applications in commercial and industrial buildings, homes, apartments and manufactured housings. This stock closed up 4.3% to $52.80 in Thursday's trading session.
Thursday's Volume: 525,000
Three-Month Average Volume: 82,907
Volume % Change: 496%
From a technical perspective, WIRE jumped sharply higher here back above its 50-day moving average of $52 with heavy upside volume. This stock has been uptrending a bit for the last few weeks, with shares moving higher from its low of $47.46 to its intraday high of $53.94. During that move, shares of WIRE have been consistently making higher lows and higher highs, which is bullish technical price action. Market players should now look for a continuation move higher in the short-term if WIRE manages to take out Thursday's high of $53.94 with strong volume.
Traders should now look for long-biased trades in WIRE as long as it's trending above Thursday's low of $49.63 or above $49 and then once it sustains a move or close above $53.94 with volume that hits near or above 82,907 shares. If we get that move soon, then WIRE will set up to re-test or possibly take out its 52-week high of $57.99.
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.