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 (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 6.8% to $19.62 in Monday's trading session.
Monday's Volume: 1.73 million
Three-Month Average Volume: 677,671
Volume % Change: 185%
From a technical perspective, AFOP ripped sharply higher here and broke out above some near-term overhead resistance at $19.38 with above-average volume. This stock has been uptrending strong for the last three months, with shares moving higher from its low of $11.16 to its intraday high of $20.02. During that uptrend, shares AFOP have been consistently making higher lows and higher highs, which is bullish technical price action. Market players should now look for a continuation move to the upside in the short-term if AFOP can manage to take out Monday's high of $20.02 with strong volume.
Traders should now look for long-biased trades in AFOP as long as it's trending above Monday's low of $18.61 or above $17 and then once it sustains a move or close above $20.02 with volume that hits near or above 677,671 shares. If that move materializes soon, then AFOP will set up to re-test or possibly take out its next major overhead resistance levels at $21.50 to its 52-week high at $23.94.