Stocks with unusual volume can often make very big moves in the coming months. Stocks with heavy volume can double, triple and even be a ten bagger. On the other hand, stocks that go down on very unusual volume can often lose more than half of its value and then some.
To witness the powerful effect of unusual volume, do take some time to read:
The above articles reveal the secret of how unusual volume affect stocks. It is a well known secret among Wall Street Traders that heavy volume means some big buying or big selling. Some of these stocks are being accumulated by powerful and rich institutions months before they advance in price. Others are being dumped heavily by institutions months before a bad news comes out.
What constitutes unusual volume?
Unusual volume is when a stock's trading volume is at least 2X more than the average daily volume. The bigger the volume the better. You can often see a stock experiencing 5X than normal volume when a large group of players are involved in the stock. If you see a stock having 10X the normal volume, then something big is going to happen to the stock!
The chart above is a very good example of what unusual volume can signal. Around November 2016 just after the Presidential Election, unusual volume came into the stock of Bank of America. What happened was investors were buying the stock in anticipation of the effect of Trump's policies which will be beneficial to financial stocks.
One of the best way to find stocks with unusual volume for free is by using FinViz.com. FinViz is a free stock charting and stock screener that is very popular among traders. You can find lots of screens and trading opportunities by using this free website. I highly recommend it.
When you go to the Home Page of FinViz, you will immediately see a group of predefined scans. Scroll down till you see unusual volume and then click on it.
Once you click on unusual volume, you will see a list of stocks and their charts. Click on "filter" on the top right.
You might want to filter stocks so you come up with the best candidates. Some illiquid stocks are to be avoided. So, you need to have an average volume of at least 100,000. Then you should choose stocks that have a market cap of $300 million and above. This will help you find candidates that are viewed by larger investors and not some penny stocks. You want institution interest because they are the ones that will be buying huge amount of shares in anticipation of a big move.
When you see a very good candidate, you might want to put it into your watchlist and carefully monitor it for a few months. Which is usually how long it takes for a stock to make a big move after experiencing unusual volume. Some stocks may take a few days to a few weeks. So, keep it on your watchlist and monitor them daily.
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