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.
Splunk (SPLK) provides software solutions that provide real-time operational intelligence in the U.S. and internationally. This stock closed up 4.8% to $60.50 in Monday's trading session.
Monday's Volume: 6.08 million
Three-Month Average Volume: 2.64 million
Volume % Change: 127%
From a technical perspective, SPLK bounced sharply higher here with strong upside volume. This stock has been downtrending badly for the last month and change, with shares moving lower from its high of $106.15 to its low of $55.55. During that downtrend, shares of SPLK have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of SPLK are now starting to bounce higher off oversold levels, since its current relative strength index reading is 33.57. Oversold can always get more oversold, but it's also an area where a stock can rebound sharply higher from.
Traders should now look for long-biased trades in SPLK as long as it's trending above Monday's low of $58.86 or above $58 and then once it sustains a move or close above Monday's intraday high of $61.95 with volume that hits near or above 2.64 million shares. If that move gets underway soon, then SPLK will set up to re-test or possibly take out its next major overhead resistance levels at $65 to its 200-day moving average of $66.09. Any high-volume move above those levels will then give SPLK a chance to tag $70 to $75.