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.
Monolithic Power Systems
Monolithic Power Systems (MPWR), a fabless semiconductor company, designs, develops and markets analog and mixed-signal semiconductors for storage and computing, consumer electronics, communications and industrial/automotive markets. This stock closed up 4.4% at $38.77 in Monday's trading session.
Monday's Volume: 683,000
Three-Month Average Volume: 284,911
Volume % Change: 133%
From a technical perspective, MPWR trended sharply higher here right off some near-term support at $37 with above-average volume. This stock has been uptrending strong for the last two months, with shares moving higher from its low of $30.79 to its recent high of $39.16. During that uptrend, shares of MPWR have been consistently making higher lows and higher highs, which is bullish technical price action. This spike higher on Monday is quickly pushing shares of MPWR within range of triggering a near-term breakout trade. That trade will hit if MPWR manages to take out Monday's high of $38.83 to its 52-week high at $39.16 with high volume.
Traders should now look for long-biased trades in MPWR as long as it's trending above support at $36.56 or above its 50-day at $35.56 and then once it sustains a move or close above those breakout levels with volume that hits near or above 284,911 shares. If that breakout gets underway soon, then MPWR will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $45 to $50.