How to Trade HCI Group

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.

HCI Group (HCI) provides property and casualty insurance products in Florida. This stock closed up 14.2% to $47.25 in Thursday's trading session.

Thursday's Volume: 518,000
Three-Month Average Volume: 191,433
Volume % Change: 169%

From a technical perspective, HCI skyrocketed higher here and broke out above some near-term overhead resistance levels at $45.21 to its 50-day at $47.17 with strong upside volume. Market players should now look for a continuation move higher in the short-term if HCI manages to take out Thursday's high of $47.55 with high volume.

Traders should now look for long-biased trades in HCI as long as it's trending above $45 or $44 and then once it sustains a move or close above Thursday's high of $47.55 with volume that's near or above 191,433 shares. If that move materializes soon, then HCI will set up to re-test or possibly take out its next major overhead resistance levels at $50 to $52.12, or its 52-week high at $53.61.

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.

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