Look for Volume Spikes
By Charles Payne
There are a ton of laws on the books designed to level the playing field of the market but it might be the impossible dream. In fact, some market observers think it's kind of silly since information gets out there and in all areas of life, from White House leaks to your cousin that accidently tells you about the surprise birthday party your family is planning for you.
This morning (July 2), there were two big takeover deals in terms of premiums, and I saw them last week, but didn't have a chance to pull the trigger. But a lot of people did pull the trigger. Considering some of the high profile legal cases of late, I think it's amazing these deals appear to be leaked. I actually saw lots of scuttlebutt on a takeover of LNCR including an email from the office on June 27th about takeover rumors.
In both cases, the key that someone might have known something is the volume. Volume spiked for both of these names last week as buyers poured into the names... why?
The lesson here is that watching volume for short-term traders is critical. When big buying comes into non-household names you know it's not a bunch of small investors taking the plunge, but instead in-the-know professionals. See charts and spike in volumes below.