Volume Tells the Story

Dynavax (DVAX) was by far the biggest mover in my account today, jumping 10.4% on a day that Dow was essentially flat. Any time I see a big move (up or down) in one of my stocks on a relatively quiet day, the first thing I do is check for news. Usually, a 10% jump in a day means that some piece of information about the company was made public that changed traders’ minds about the value of the company. This news could be a court ruling, a change in management, a purchase, an announcement, a leak, or even simply a rumor. However, depending on the size of the company, sometimes news doesn’t get reported in the media until a few days later, if it ever even gets reported at all. In these instances, there is another place to look to determine if something important may have happened with the company.

When I didn’t see any major news reported on DVAX today, the first thing I looked at was the volume. DVAX’s volume today was slightly about 3 million shares,  over 2 million shares below its average daily volume during the past 3 months. This relatively low volume is a good indication that I didn’t miss anything important. When a 10% move is due to shareholders buying or selling on news, the move in share price would be accompanied by a spike in volume. Since the big move in DVAX happened today on such low volume, it can be attributed to a lack of sellers more than a rush of buyers. So why did DVAX move so much? I certainly don’t know why. And with a volatile stock like DVAX, there’s a good chance that there was absolutely no reason at all other than normal daily market fluctuation. If AAPL drops 10% in a day, you can bet the house there was a reason. When a small biotech company like DVAX moves 10% in a day, there’s no guarantee there was a particular reason. A 10% single-day jump is nice to see, but with a volatile stock like DVAX, I wouldn’t be surprised to see a 10% drop tomorrow. Since I am not a day-trader, I really don’t care if it will be up or down tomorrow. I am afforded the luxury of being patient and ignoring the volatile day-to-day price fluctuations.