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.
Alnylam Pharmaceuticals (ALNY), a biopharmaceutical company, engages in discovering, developing and commercializing novel therapeutics based on RNA interference. This stock closed up 7% to $84.70 in Thursday's trading session.
Thursday's Volume: 988,000
Three-Month Average Volume: 635,785
Volume % Change: 125%
From a technical perspective, ALNY ripped sharply higher here and broke out above some near-term overhead resistance at $83.63 with above-average volume. This move is quickly pushing shares of ALNY within range of triggering an even bigger breakout trade. That trade will hit if ALNY manages to take out Thursday's high of $85.54 to some more near-term overhead resistance at $86.86 with high volume.
Traders should now look for long-biased trades in ALNY as long as it's trending above Thursday's low of $78.97 and then once it sustains a move or close above those breakout levels with volume that's near or above 635,785 shares. If that breakout triggers soon, then ALNY will set up to re-test or possibly take out its next major overhead resistance levels at $90 to $93.