Pump Up The Volume: Bond International, Hochschild, Oxford Biomedica, Petropavlovsk

Perhaps rather unusually amongst those who look at the stock market from a technical perspective, I do not place a great emphasis on volume backing price action. This is because of the somewhat cynical attitude, that over the short term many traders actually get it wrong.

So, the biggest spikes in volume, both for buying and selling, can be in the aftermath of surprises. They can take the form of profits warnings – where there is a spike on the sell side, or the announcement of a bid approach. On such days volume may be two or more times the normal. But even though the technical rules would suggest that one should go with this momentum, it very often tends to be the climax of a move, not something to follow. Even worse, it could be said that sometimes it is worth following, and sometimes not.

So what is the answer? I will attempt to address the issue via the stocks examples below.

Bond International (BDI) is arguably a relatively obscure starting point in the volume stakes. However, it should of course be the case that one can back any play where there has been a spike in activity. As can be seen from the volume window, Friday was a massive day for the shares, the biggest in terms of interest since November 2013. What is also noticeable on the daily chart is the way that the move higher melted through the still falling 200 day moving average now at 103p. It is usually the case that surges in stocks and markets when the 200 day line is still on the descent tend to accompany the strongest and most sustainable rallies. At least this is the expectation while there is no end of day close back below the key moving average. The upside at this stage is seen as being the top of the 2013 price channel currently heading as high as 180p over the next 2-3 months.

With Hochschild Mining (HOC) it can be seen how Thursday and Friday were very big days in terms of both the price action and the volume. The Thursday action was a standout given the way that the 20 day moving average and the former December support at 77.8p were recovered. Friday gave the all important weekly close above the 50 day moving average, as well as a closing high for March. The hope now would be that provided the Thursday peak of 83p is held on an end of day close basis we should be treated to a journey towards the 200 day moving average at 121p/January resistance. The timeframe on such a move is seen as being as soon as the next 2-4 weeks.

Oxford Biomedica (OXB) is a situation which ties in well with the current fashion for all this biotech. What can be seen here on the daily chart timeframe is the way that things really started to kick off well from the start of the year. The view currently is we should see further progress, despite all the gains to date, within a rising trend channel from November. The top of the channel is pointing us towards a 16p destination, a level which could be hit by the beginning of next month. Overall, it would not be surprising if the stock stretched much higher than 16p later in the year, after an appropriate cooling off period.

Finally we have Petropavlovsk (POG), where the buy side volume spike is at its highest for some five years. It would be surprising, and indeed disappointing, if this were not significant. The technicals suggest that at least while there is no break back below the 50 day moving average at 5.09p the near term target for the troubled mining sector group could be as high as a December price channel top/200 day moving average at 9p plus over the next 1-2 months.