The Volume Clue Most Traders Miss Before a Stock Explodes
FCEL recently gave a great example of the type of price-volume action I like to look for.
I get a lot of questions on this, so I thought I would share a simple example.
First, you had several strong up days on volume that was roughly 2x, 3x, and even 4x above normal.
That tells you demand was coming in.
But the more important clue came after the move.
The stock pulled back for a few days into the 10-day moving average, but it did it on much lighter volume.
Price was pulling back, but sellers were not showing up aggressively. Volume was drying up as the stock rested.
Then, when price started moving higher again, volume expanded sharply. It was more than 3x the volume we saw during the pullback.
That is the type of action O’Neil and Minervini both teach traders to recognize:
Strong advance on heavy volume.
Controlled pullback on lighter volume.
Renewed move higher with demand coming back in.
Of course, this alone does not make a stock a buy. You still need the market, fundamentals, relative strength, industry group strength, setup quality, and risk/reward to line up.
But as a pure price-volume lesson, this is a clean example.
The big clue was not just that volume came in.
The clue was that volume disappeared on the pullback, then came back when price started moving higher again.
