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.
With that in mind, let's take a look at several stocks rising on unusual volume recently.
Walter Energy (WLT) produces and exports metallurgical coal for the steel industry. This stock closed up 9.9% at $11.09 in Wednesday's trading session.
Wednesday's Volume: 10.65 million
Three-Month Average Volume: 6.26 million
Volume % Change: 135%
From a technical perspective, WLT ripped sharply higher here right off its recent low of $9.90 with above-average volume. This stock has been downtrending badly for the last two months, with shares plunging lower from its high of $17.40 to its recent low of $9.90. During that downtrend, shares of WLT have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of WLT are now spiking sharply higher off that $9.90 low and quickly moving within range of triggering a near-term breakout trade. That trade will hit if WLT manages to take out Wednesday's high of $11.11 to some more near-term overhead resistance levels at $11.47 to $11.89 with high volume.
Traders should now look for long-biased trades in WLT as long as it's trending above Wednesday's low of $9.95 or above $9.90 and then once it sustains a move or close above those breakout levels with volume that this near or above 6.26 million shares. If that breakout starts soon, then WLT will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $12.96 to its 200-day moving average of $13.98.