Price up sharply on unusually high volume.
This alert signals that a company's stock price has jumped by at
least 5% on trading volume that is at least three times the
average daily volume of the last 13 weeks.
Volume is the fuel of the market, since stock
prices only move up or down when shares are trading hands. Most
stocks trade hands at an even pace for days or weeks at a stretch
until special events occur. Those events might be rather ordinary,
such as an announcement of earnings, a new product or new
executive. Or they might be extraordinary, such as a merger or a
new corporate alliance.
Sometimes, however, trading volume spikes upward
and the price moves higher for no apparent reason. Very often it
ultimately turns out that the reason was major purchases of the
stock by large institutions, hedge funds, mutual funds or private
investors. The stealthy entry of strong players into a stock with
enough buying power to boost volume by more than 200% and buoy the
price is bullish for current investors. These major players are
generally more knowledgeable and critical about their investments
than individual investors -- and their entry at a particular price
tends to set a floor for the future trading of a stock.
By itself, however, a price jump on big volume
is not a reason to buy or hold a stock. It is just a clue that the
stock is likely to be under accumulation by major players.
Occasionally, stocks that rise fast when bought by price-momentum
traders -- that is, investors who buy stocks simply because they
are going up, trying to catch the trend -- can go down equally
fast when bad news hits.
To determine whether the stock is under
accumulation by big traders more attracted to the company’s
fundamental story, check Form 13-D and Form 13-G SEC filings in
Stock Research. Any investor or fund company that becomes the
"beneficial" owner of more than 5% of a stock must tell the
government -- and, by extension, you -- within 10 days.