Let’s say that average daily volume for a stock is 100,000 shares. Then, one day the volume expands to 1,000,000 shares traded and that’s the same day that the price moves upward to a significantly higher high. You don’t have to be a hedge fund manager to figure that something’s up.
It might be that expectations for quarterly earnings have been greatly exceeded, that’s typical in these instances. Or it might be that a central bank has taken action to stimulate an economy. Or it could be that a trade agreement is said to be accomplished and that certain stocks are directly affected.
All of those reasons are interesting to a fundamental analyst but to a pure price chart analyst, the “why” doesn’t really matter. If the stock has blasted to a much higher level and the expansion of volume is dramatic, it’s probably enough knowledge to confirm that buyers are confident.
Here are 4 recent price charts of financial equities that demonstrate the phenomenon:
AllianceBernstein Holding is a New York Stock Exchange traded stock that exploded last week.
AllianceBernstein Holdings daily price chart, 12 16 19.
Average daily volume had been 296,000. The Friday volume came in at 1,250,00 — is that 4 or 5 times the usual amount, more or less? What’s more, the buyers took out the previous spot where sellers had been dumping the stock. Closing above the mid-November peak of 30 on that kind of volume is…interesting.
Grupo Financiero Santander Mexico is NYSE-listed and took out its late November high as well. This is an hourly chart to show how it works on different time frames:
Grupo Financiero Santander Mexico, 60-minutes price chart, 12 16 19.
The late-in-the-day buying on sudden high volume took the price back up to near 6.70 by the close on Friday and then, at the Monday open, it gapped up and continued higher. From a technical analysis standpoint, it’s positive to see this kind of volume expansion going into new peaks.
Royal Bank of Scotland, headquartered in London, is traded on the New York Stock Exchange.
Royal Bank of Scotland daily price chart, 12 16 19.
It’s a classic stock chart of price and volume. Goodbye to the October peak price as the number of shares traded exploded and the stock gapped up to a higher level. Do you suppose it might be related to the election outcome in the United Kingdom? Just guessing.
China Internet Nationwide Financial Services is a low volume NASDAQ-traded that just popped from about 80 cents a share to 1.16.
China Internet Nationwide Financial Services, daily price chart, 12 16 19.
Typically, not the sort of stock a value investor or hedge fund would touch, but it shows the dynamics of high volume and sudden price moves. I would guess that this is speculation about a the possibility of an actual US/China trade agreement whether valid or not.
Stats courtesy of FinViz.com.
I do not hold positions in these investments. No recommendations are made one way or the other. If you’re an investor, you’d want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.