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.
AeroVironment (AVAV) designs, develops, produces, supports and operates unmanned aircraft systems, tactical missile systems, and efficient energy systems in the U.S. and internationally. This stock closed up 5.6% to $35.33 in Monday's trading session.
Monday's Volume: 841,000
Three-Month Average Volume: 327,116
Volume % Change: 149%
From a technical perspective, AVAV ripped sharply higher here right above its 50-day moving average of $32.76 with strong upside volume flows. This sharp spike higher on Tuesday is quickly pushing shares of AVAV within range of triggering a big breakout trade. That trade will hit if AVAV manages to take out some near-term overhead resistance levels at $36.45 to $36.50 and then once it clears some past resistance levels at $36.97 to $37.90 with high volume.
Traders should now look for long-biased trades in AVAV as long as it's trending above Monday's intraday low of $33.43 or above its 50-day at $32.76 and then once it sustains a move or close above those breakout levels with volume that hits near or above 327,116 shares. If that breakout gets underway soon, then AVAV will set up to re-test or possibly take out its next major overhead resistance level at it 52-week high of $41.67.