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5 Stocks With Unusually High Volume

Posted: Feb 04, 2010 11:57 AM by Joseph Nguyen

Tickers in this Article: AMTD, BKS, BP, LXK, SU

Most of the time, the price of a stock gets the most attention in the media and is the main focus of investors and traders. But another aspect of markets and stocks - volume - often gets neglected. A review of volume can highlight equities that are showing increasing levels of activity, and it can serve as a good initial screen for further research. After all, it is volume, or supply and demand that causes price fluctuations. By leaving out price changes, we eliminate low liquidity stocks that usually have volatile swings on large volume. Thus, here are five stocks with an increasing number of shares changing hands:

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BP Plc (NYSE: BP) - Three-month average volume: 4.3 million; 10-day vs. three-month volume ratio: 1.4
The giant oil company had an average share volume in its ADRs of approximately 4.3 million over the past three months. Over the last 10 days, the average number of shares traded surged by 40%, to average just over 6 million shares a day. The surge of volume was negative for the stock as increased selling pressure pushed the stock lower by over 5% for the trailing week. Weaker-than-anticipated earnings in Q4 2009 was the main trigger for the selloff.

Suncor Energy Inc (NYSE:SU) - Three-month average volume: 5.9 million; 10-day vs. three-month volume ratio: 1.3
Suncor's activity was similar to that of BP's where a weaker-than-expected fourth quarter sent volume up and share prices down. Suncor's three-month trailing volume averaged just under 6 million, and its 10-day average has surged 30% to just under 8 million. The downward selling pressure has sent Suncor's shares down over 5% in the past week.

TD Ameritrade Holding Corp (Nasdaq:AMTD) - Three-month average volume: 4.7 million; 10-day vs. three-month volume ratio: 1.4
TD Ameritrade, the firm specializing in securities brokerage services, also saw increased activity in its shares in the past week. Volume over the past 10 days spiked over 40% from its three-month average of 4.7 million shares. The increase was especially pronounced on February 2, 2010, as Fidelity announced that it would cut its trade commissions to a flat fee of $7.95. The news sent shares of Ameritrade down just over 3% on the day. Without a response, TD Ameritrade will likely lose market share to Fidelity, and even if it institutes a knee-jerk price cut of its own, margins will get squeezed - either way it doesn't look good for TD Ameritrade.

Lexmark International Inc (NYSE:LXK) - Three-month average volume: 1.4 million; 10-day vs. three-month volume ratio: 2.0
One company in this list that has seen a positive response in its stock price from increased volume is Lexmark. Ten-day average volume increased nearly 100% to 2.8 million from its three-month average of 1.4 million shares, as investors pushed share prices up about 10% in the past week. Most of the gains were spurred by a positive quarterly report in which management reported solid results and spoke optimistically about future periods.

Barnes & Noble Inc (NYSE:BKS) - Three-month average volume: 1.8 million; 10-day vs. three-month volume ratio: 1.6
Shares of Barnes & Noble have also seen increased attention in the past few days. The company's 10-day share volume has spiked over 60%, to nearly 3 million, which sent share prices up about 8% in the trailing week. The activity was caused by indications by Ronald Burkle that he wanted to increase his holdings in Barnes & Noble, which was implied by Mr Burkle's challenge to a poison-pill provision that prevented him or his investment funds from acquiring more than 20% of the company. (Learn about other types of takeover defenses in addition to the poison-pill, in Corporate Takeover Defense: A Shareholder's Perspective.)

The Bottom Line
With stocks that exhibit sudden increases in share volume, typically the applicable strategy would be to use a momentum strategy and take either the long or the short side of the trade to get ahead of the trend. And with the overall market in a short-term downtrend, finding and catching a downtrend in one of these stocks can substantially enhance returns for the investor.

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By Joseph Nguyen

Joseph Nguyen is an Research Analyst and contributing author at Investopedia. He graduated from the University of Alberta with a Bachelor of Commerce degree and specializes in financial analysis and research. Prior to joining Investopedia, he worked at a securities brokerage firm.

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