How to Trade China Petroleum: Stocks Rising on Unusual Volume

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.

China Petroleum & Chemical (SNP), an energy and chemical company, through its subsidiaries, engages in the oil and gas, and chemical operations in the People's Republic of China. This stock closed up 3.8% at $86.68 in Thursday's trading session.

Thursday's Volume: 575,011
Three-Month Average Volume: 159,072
Volume % Change: 330%

From a technical perspective, SNP gapped up notably higher here with strong upside volume. This move briefly pushed shares of SNP into breakout territory, since this stock flirted with some past overhead resistance at $86.75. Shares of SNP hit an intraday high of $86.80, before closing the trading session at $86.68. Market players should now look for a continuation move higher in the short-term if SNP manages to clear Thursday's high of $86.80 to more near-term overhead resistance at $88 with strong volume.

Traders should now look for long-biased trades in SNP as long as it's trending above Thursday's low of $84.70 or above $83 and then once it sustains a move or close above $86.80 to $88 with volume that's near or above 159,072 shares. If that move materializes soon, then SNP will set up to re-test or possibly take out its 52-week high at $90.88.

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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