Stocks stuck within a range is one of the better technical patterns we can look to trade. I like them because you really can define your trading plan – you know upfront what your entry and exit points are. When I look for sideways trading stocks, I try to find stocks (or ETF’s) with a very defined top (i.e. point of resistance, past selling pressure) AND a well-defined bottom ( i.e. point of support, buying pressure).
If a stock has a nicely defined, relatively flat looking point of resistance but a choppy support level, it becomes too hard to pick your entry point. The reverse is true for stocks with flat bottoms but choppy resistance points—it’s hard to find the right exit point. Please also bear in mind that a breakout from a defined trading range – whether from the top of the range or the bottom of the range—indicates a strong potential that the prior range is finished, and a new trend (up or down) may have begun.
Of course it goes without saying, this blog is intended to provide information about stock markets and technical analysis in general. Readers should seek advice on their specific circumstances and do their own research before making personal investments of these ideas or any kind. With those factors in mind, here are 4 range-bound securities that are worthy of a near termed trading strategists’ attention – readers are encouraged to post comments below with your own observations of stocks that might be trading in a range:
The BMO equal wt. US bank index (ZUB-T) shows us a relatively flat pattern for that group. The ETF seems to be near the bottom of its trading range now, near $25/sh. Top of the range is about $26.50- truly a tight range suitable only for those considering a quick trade. Consider this ETF or an individual stock within the index if you are looking for tight sideways trading patterns to exploit.
A reader asked me about this stock on the blog, which I have traded in the past. This is one of my favorites and I’ve put it on my BNN Top Picks before. It seems to have a nice range from $29/sh to $36/sh. The strategy is simple. Consider a buy of Stantec (STN-T) after a decline then bounce from $29. It looks like a sell at the top of the range, near $36.
We currently own this stock. Mondelez (MDLZ-US) has a trading range is from about $41 to $46 – currently it sits near the top of that range. The stock could break out if a buyout or merger within the industry occurs—which has been “the talk” lately. But if it doesn’t, expect more of the same sideways action. Buy the lows, sell the highs in this range.
After holding within a range of $25- $28 over 2014 to 2015, this stock (GE-US) is now stuck between $28 – $32. Note on the chart how old resistance of $28 became the new level of support. A fundamentally solid company with a pretty defined trading range makes this an attractive short termed trading candidate to buy near $28, and sell near $32. Its right at the bottom of the range right now. We hold a position in this stock.
VOLATILITY BACK UNDER 10: MEANINGFUL DATA?
The last time the VIX was below 10 was 2007.
Now let me think for a minute. Waht happened after 2007…hmmm…
Oh yeah–the greatest crash since 1929 happened a year later. Gosh. I almost forgot (ha ha). Evidently, so have other investors.
Low VIX = complacency. It doesn’t signal the precise date of a downward move–as seen in 2007 it took a while before the VIX’s signal was proven right, and it does not guarantee a correction. But it does increase the odds of a correction or crash.
I might suggest you read my blog on the “wave 5” suggestion I made: https://www.valuetrend.ca/not-theres-anything-wrong/
“LAST INSTANCE OF A SUB 10 PRINT ON THE VIX, THE S&P 500 SHED OVER 5% ON THE DAYS THAT FOLLOWED”. THAT WAS THE 31/12/2017
EQUITY CLOCK (01/05/2017)
I was referring to the cluster of sub 10’s the VIX has been putting in lately, but yes, thanks for bringing that up–it did happen in December too. All in, its a leading indicator, and these low readings are just one more thing that seem to be suggesting possible correction or flat markets some time in the coming summer/autumn period.
ERROR: THAT WAS THE 31/12/2007 INSTEAD OF 31/12/2017