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.
Alliance Fiber Optic Products
Alliance Fiber Optic Products (AFOP) designs, manufactures and markets various fiber optic components and integrated modules for communications equipment manufacturers and service providers in North America, Europe and Asia. This stock closed up 12.5% to $16.68 in Wednesday's trading session.
Wednesday's Volume: 1.43 million
Three-Month Average Volume: 583,344
Volume % Change: 167%
From a technical perspective, AFOP gapped sharply higher here back above its 200-day moving average of $15.68 and above some more near-term overhead resistance at $16.20 with strong upside volume. This sharp spike higher on Wednesday is quickly pushing shares of AFOP within range of triggering another big breakout trade. That trade will hit if AFOP manages to take out Wednesday's high of $17.20 to some more near-term overhead resistance at $17.81 with high volume.
Traders should now look for long-biased trades in AFOP as long as it's trending above its 200-day at $15.68 or above $15 and then once it sustains a move or close above those breakout levels with volume that hits near or above 583,344 shares. If that breakout hits soon, then AFOP will set up to re-test or possibly take out its next major overhead resistance levels at $21.48 to $22.