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.
Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."
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.
Datawatch (DWCH) designs, develops, markets and distributes business computer software products in the U.S. and internationally. This stock closed up 9.1% to $15.80 in Wednesday's trading session.
Wednesday's Volume: 357,000
Three-Month Average Volume: 238,111
Volume % Change: 89%
From a technical perspective, DWCH spiked sharply higher here right above its 50-day moving average of $13.78 with above-average volume. This move higher on Wednesday pushed shares of DWCH into breakout territory, since the stock took out some near-term overhead resistance at $14.92. Shares of DWCH are now starting to move within range of triggering another big breakout trade. That trade will hit if DWCH manages to clear Wednesday's intraday high of $15.88 to some more key overhead resistance at $16.31 with high volume.
Traders should now look for long-biased trades in DWCH as long as it's trending above Wednesday's intraday low of $14.46 and then once it sustains a move or close above those breakout levels with volume that hits near or above 238,111 shares. If that breakout triggers soon, then DWCH will set up to re-fill some of its previous gap-down-day zone from April that started just above $22.