• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock How to Spot Low-Volatility Stocks That are Ready to Explode
Stock

How to Spot Low-Volatility Stocks That are Ready to Explode

by December 10, 2024
by December 10, 2024 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

As the year winds down, investors are beginning to position their portfolios for the New Year. I’m considering it, and perhaps you are too.

Next year, in addition to the seasonal rotations among sectors, we have a plot twist: a new administration in D.C. likely to bring disruptive policy changes affecting the market.

The Financials sector is expected to perform well under the new administration. If that’s the case, it’s worth taking a closer look at this sector and identify which stocks to watch for potential buy opportunities. If you’re already considering financial stocks and looking to fine-tune an entry before year-end, then consider those that have pulled back or are trading in a tight, low-volatility consolidation range—prime candidates for a potential bounce.

How can you spot these opportunities? One way is to use MarketCarpets’ Bollinger Band Width setting.

On Monday, I used this tool with the Latest Value setting, which provides a score between 0 to 100. The closer to zero, the narrower the BandWidth. The narrower the BandWidth, the greater the likelihood of spotting a “squeeze” leading to a significant price move or a breakout.

FIGURE 1. MARKETCARPETS BOLLINGER BAND WIDTH SET TO LATEST VALUE. It won’t be surprising if most of the big stocks on the list with the lowest value exhibit similar patterns.Image source: StockCharts.com. For educational purposes.

If you look at the table on the right, you’ll see that the three biggest stocks with the lowest chart values are Visa (V), Mastercard (MA), and Berkshire Hathaway B shares (BRK/B). If you were to continue scrolling, the three big banks with the narrowest Bollinger Bandwidths are Bank of America (BAC), Morgan Stanley (MS), Goldman Sachs (GS), and JP Morgan Chase (JPM). For many investors, some of these shares are quite expensive. So, let’s consider that and focus on the stocks that are more relatively affordable to most readers: BAC, MS, and JPM.

Before diving into these stocks, let’s examine the sector’s breadth using a daily chart of the S&P FInancial Bullish Percent Index ($BPFINA). We’ll also compare the relative performance of the Invesco KBW Bank ETF (KBWB) as a proxy for the large U.S. banking industry against the Financial Select Sector SPDR (XLF), which represents the broader financials sector.

Sector Breadth and Relative Performance of Banks vs. Sector

The $BPFINA shows the percentage of stocks signaling Point & Figure “buy” signals. Right now, 91% of S&P financial stocks are flashing buy signals (see below).

FIGURE 1. FINANCIAL SECTOR BULLISH PERCENT INDEX. The Financial sector is bullish but potentially oversold.Chart source: StockCharts.com. For educational purposes.

While a BPI figure above 50% is bullish, above 70% signals that the sector is potentially overbought. On an industry level, the banking industry is outperforming broader financials by 11% and rising.

Bank of America

Let’s get to the stocks, starting with a daily chart of BAC.

FIGURE 2. DAILY CHART OF BANK OF AMERICA. Is the stock poised for a big move up or down?Chart source: StockCharts.com. For educational purposes.

There’s a lot here, so I’ll bullet the key points:

BAC’s technical strength, as measured by the StockChartsTechnical Rank (SCTR) is slightly declining, but at a level just below 70, it signals only slight weakness.The Bollinger BandWidth has decreased significantly, and BAC’s price is above the lower band. This doesn’t signify a squeeze as much as a low volatility pullback. But what are the chances that BAC is likely to decline further?On a relative performance scale, BAC is slightly underperforming its industry, down barely 2%.In terms of momentum, there’s a divergence between indicators: On Balance Volume (OBV) suggests high buying pressure, possibly driven by retail investors, while Chaikin Money Flow (CMF) indicates strong selling pressure, likely reflecting institutional activity.

BAC is one of the largest US banks, so I’d add it to my ChartList as a possible prospect for a longer-term investment. However, given the mixed technical signals, I consider this a wait-and-see moment, observing how price reacts at current levels and whether the OBV and CMF can align if BAC continues its move to the upside.

How does BAC compare with Morgan Stanley?

Morgan Stanley

Let’s take a look at a daily chart.

FIGURE 3. DAILY CHART OF MS. The stock’s performance, as measured by SCTR, is performing slightly better than BAC.Chart source: StockCharts.com. For educational purposes.

MS’s SCTR score, at 83, is stronger than BAC’s and close to the 90 level, which might be considered exceedingly bullish.As its Bollinger BandWidth narrows, the stock has also fallen below support, coming out of a rounding top, and looking to fill the wide gap made at the beginning of November.MS is slightly outperforming its industry peers by slightly over 3%, better than BAC’s relative performance.Selling pressure, however, is strong, and the OBV and CMF appear to align.

This appears to be a classic pullback scenario. I would add this to my ChartList, as MS is one of the biggest players in the industry, but I’d wait for a bounce and monitor a bullish reversal in both the OBV and CMF before considering a long position.

JP Morgan Chase

Finally, let’s look at the last big bank on my list: JP Morgan Chase. Below is a daily chart.

FIGURE 4. DAILY CHART OF JPM. The divergence in the OBV and CMF is something to watch carefully.Chart source: StockCharts.com. For educational purposes.

JPM’s SCTR score of 76 is declining, yet still relatively bullish.Its Bollinger BandWidth indication is similar to the two we just viewed. In JPM’s case, traders seem hesitant to commit to any direction as price settles right below the middle band. It’s as if they’re waiting for some indication to trigger movement in one direction or another. Regarding relative performance, JPM is barely outperforming its industry peers, by a little over 1%.Similar to the BAC example, there appears to be a potential, yet prominent divergence between retail buying and institutional selling, as the OBV has been climbing while the CMF has been steadily declining.

JPM is sitting in a near-term holding pattern. It’s going to break eventually. But for now, the market appears unable to commit to a given direction, and the mixed momentum signals seem to support this view. It’s best to monitor this on my ChartList and wait for stronger bullish signals and a definitive reversal to the upside before jumping in. In short, patience.

At the Close

Planning the coming year, I focused on a given sector (Financials) and used MarketCarpets’ Bollinger BandWidth setting to identify stocks with tight, low-volatility setups that might signal a breakout opportunity. This led me to BAC, MS, and JPM. While these stocks remain on my ChartList as longer-term prospects, I’m opting for a wait-and-see approach. Fine-tuning an entry is important. And while there are many ways you can do this, I just showed you one approach that might just come in handy given the right circumstances.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

You Might Also Like
  • Heads Up! 10-Year Treasury Yield Could Go All the Way to FIVE Percent?
  • You Need To Realize ONE Important Fact With Big Rallies Like This One
  • DRI Stock Breakout Confirmed: Here’s What You Need to Know Now!
  • The Market Breadth Indicator You Should Be Following
Share
0
FacebookTwitterPinterestWhatsapp

previous post
OpenAI releases Sora, its buzzy AI video-generation tool
next post
3 WAYS to Pinpoint When a Stocks Uptrend is Ending

You may also like

Industrials Ignite as Bitcoin Blasts Off

July 11, 2023

Equities Continue Surge Amid “Healthy” Rotation

August 26, 2024

Many Stocks in This Industry Popped After Strong Earnings Results...

March 4, 2023

The Halftime Show: Under the Hood — Short Interest Gainers...

April 24, 2023

GNG TV: Equity Markets Hanging on to “Go” Trend

May 26, 2023

Find Great Trading Ideas By Combining SCTR Rankings and RRG

November 10, 2023

Clear Split in NY FANG+ Universe Offers Pair Trading Universe

March 8, 2024

Buoyant Technical Setup In This CV Stock

February 3, 2023

Sector Rotation Breakdown: Spotting Market Leaders Now

March 14, 2025

The Halftime Show: An In-Depth Overview of Chaikin Power Gauge...

February 21, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Nvidia results spark global chip rally

      May 30, 2025
    • Boeing to resume airplane deliveries to China next month, ramp up Max production, CEO says

      May 29, 2025
    • Nuclear Power Trio: OKLO, SMR, and CCJ in Focus

      May 29, 2025
    • Analyzing SIL, USO, and NVDA: Could These Bullish Patterns Trigger?

      May 29, 2025
    • E.l.f. Beauty to acquire Hailey Bieber skin care brand Rhode in up to $1 billion deal

      May 29, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,764 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,470 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,450 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,429 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,307 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,104)
    • Investing (538)
    • Stock (2,578)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Nvidia results spark global chip rally

      May 30, 2025
    • Boeing to resume airplane deliveries to China next month, ramp...

      May 29, 2025
    • Nuclear Power Trio: OKLO, SMR, and CCJ in Focus

      May 29, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,104)
    • Investing (538)
    • Stock (2,578)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Sector Spotlight: Risk to S&P as...

    August 8, 2023

    Equity Markets Rebound As Discretionary Out-Performs

    September 16, 2024

    Today’s Price Action Could Be the...

    August 19, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here