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.
Finisar (FNSR) provides optical subsystems and components for data communication and telecommunication applications in the U.S., Malaysia, China and internationally. This stock closed up 6.1% at $24.04 in Wednesday's trading session.
Wednesday's Volume: 3.57 million
Three-Month Average Volume: 2.28 million
Volume % Change: 59%
From a technical perspective, FNSR ripped sharply higher here back above its 50-day moving average of $23.49 with above-average volume. This stock has been trending sideways for the last two months and change, with shares moving between $20.89 on the downside and $25.13 on the upside. This spike on Wednesday is quickly pushing shares of FNSR within range of triggering a near-term breakout trade above the upper-end of its recent sideways trading chart pattern. That trade will hit if FNSR manages to take out Wednesday's high of $24.06 to some more key overhead resistance levels at $24.80 to $25.13 with high volume.
Traders should now look for long-biased trades in FNSR as long as it's trending above Wednesday's low of $22.26 and then once it sustains a move or close above those breakout levels with volume that's near or above 2.28 million shares. If that breakout starts soon, then FNSR will set up to re-test or possibly take out its next major overhead resistance level at its 52-week of $26.66. Any high-volume move above that level will then give FNSR a chance to tag or trend north of $30.