How To Find That Winner Using Volume Surges

We want to talk about volume for a few minutes. Without a doubt, volume will proceed a move, both up and down.

One of the most interesting things you will ever see in the market is an "unexplained" volume surge on a stock with no news. Almost invariably, this is the action of insiders either buying or selling their stock. Then a while down the road, we see the stock surge on good news, or fall on bad news. It's uncanny.

So what's that all about? Let's suppose the insider's know they are working a big deal and it's going to make news. For all the laws that say it's illegal for them to trade on that news, the reality is much different. In reality, they mention it to "John" at dinner, and they call Aunt Martha who might just want to "buy a few shares". In no time, this stock is getting bought up, with no underlying reason for it. But then you see a week later the company announces a big deal and "boom" up it goes.

We know several traders who do nothing more than look for unusual volume surges with no associated news. In almost 80% of the cases, if they take a gamble on the stock, it works out for them. But, how do they know if the news will be good or bad? Watch the price action on the day or days of the volume surge. If the stock rises on it, the news will usually be good. If it's a dip day, the upcoming news will be bad.

There are a few free resources one can use to screen for abnormal volume surges, but none of them are really so very reliable that they work with an 80% degree of reliability. What we need to be doing is looking for those stocks that popped with volume, on no news. These are the ones to zero in on.

We do not find them on a daily basis, sometimes a whole week goes by and we find nothing special. But usually a couple times a month we find that gem and as it's worked better than 80% of the time.

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