Not all major stock moves are created equal.
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Some are associated with a large trading volume. Others come with just a wail of activity.
Which are more important? Often it is the high volume movements who pack the most punch.
When investing in stocks, when a crowd forms, it usually sticks around for a while. Once a news catalyst generates interest in a company, more investors buy and sell — translating into more eyeballs looking at the stock.
Large volume shifts can also predict the direction a stock will take over the longer term. When a mass of bulls forms, it often intends to dig in its heels and not sell shares. This tends to keep upward pressure on price movements. The reverse is also often true when a bearish crowd gathers.
Last week, several large caps had unusually high volume as a result of important news. Reversals happen all the time, but it will be difficult to turn the current tide on these three stocks.
Why has 3M stock fallen?
3M Company (NYSE: MMM) stocks fell 9.5% on Friday at more than 8x their 90-day average volume. The sale was in response to a bankruptcy court in Indiana overturning Aearo Technologies’ request for a ban on the legal action against 3M regarding Aearo’s Combat Arms earbuds. The 3M subsidiary is the subject of more than 200,000 lawsuits alleging that the defective earplugs on the battlefield caused hearing loss in US soldiers.
The move was intended to stop the claims on the grounds that Aearo Technologies is insolvent and to encourage plaintiffs to participate in settlement discussions. An adverse decision now has 3M headed for a jury trial that, according to Bloomberg, could force the company to pay more than $100 billion in damages.
Although 3M said it will appeal the bankruptcy court’s ruling, the market sees little chance of success. It is more than likely that a lengthy and potentially expensive lawsuit lies ahead – which is why so many investors chose to get out. Sometimes corporate legal fortunes can fluctuate on a dime, but it looks like 3M could be stuck in a downtrend for the rest of the year.
Will Zoom Stock recover?
Zoom Video Communications, Inc. (NASDAQ: ZM) dropped to 6 times the average volume in the wake of his Second quarter earnings report. The video communications platform provider disappointed the market with 8% revenue growth that was miles away from the type of growth it reported during the early pandemic. It marked the sixth consecutive quarter of slower revenue growth after Zoom grew 369% in the fourth quarter of fiscal 2021.
It didn’t help that management offered a weak outlook for the current quarter. The company’s projection of approximately $1.1 billion in revenue in the third quarter implies 5% year-over-year growth and indicates that the slowdown will continue.
Many shareholders hoping for a turnaround decided it was finally time to sign Zoom. The stock has squandered all of its pandemic gains and failed to attract a herd of bulls since it soared to nearly $600 in October 2020.
While businesses large and small are still incorporating online collaboration tools into their day-to-day workflows, Zoom is no longer the solution it used to be. Microsoft’s Teams and Salesforce’s Slack are formidable challengers in what has become a crowded field of alternatives. Zoom introduces new products and features to attract customers, but faces an uphill battle with fierce competition and cautious corporate spending in today’s economic environment.
Why is Occidental Petroleum trading volume rising?
Volume at Occidental Petroleum Corporation up again (NYSE: OXY) last week sent the oil and gas producer to a new 52-week high. Increased trading in the stock stemmed from Warren Buffet’s continued interest in acquiring a larger stake in Occidental after it fell back below $60.
The legendary investor’s Berkshire Hathaway conglomerate received regulatory approval to buy a whopping 50% of the company. He already owned about 20% of Occidental after aggressively acquiring shares in recent months. Taking into account the warrants Buffet received as part of Occidental’s acquisition of Anadarko, he now owns more than a quarter of its equity.
Gaining permission to nearly double his position from here sets the stage for the Oracle of Omaha to eventually buy Occidental outright, something many forecasters see as inevitable. In the short term, the company has benefited higher energy prices and is clearly seen by Buffet as a form of attractive long-term value investment.
With headlines surrounding Buffet and Occidental in 2022, the stock has caught the attention of retailers who have embraced it as a meme game. Between Berkshire’s relentless pursuit and the newfound interest in social media, Occidental seems destined to stay higher.
