{"id":13081,"date":"2024-12-11T00:01:04","date_gmt":"2024-12-11T00:01:04","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2024\/12\/11\/how-to-spot-low-volatility-stocks-that-are-ready-to-explode\/"},"modified":"2024-12-11T00:01:04","modified_gmt":"2024-12-11T00:01:04","slug":"how-to-spot-low-volatility-stocks-that-are-ready-to-explode","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2024\/12\/11\/how-to-spot-low-volatility-stocks-that-are-ready-to-explode\/","title":{"rendered":"How to Spot Low-Volatility Stocks That are Ready to Explode"},"content":{"rendered":"
\n

As the year winds down, investors are beginning to position their portfolios for the New Year. I\u2019m considering it, and perhaps you are too.<\/p>\n

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.<\/p>\n

The Financials sector is expected to perform well under the new administration. If that\u2019s the case, it\u2019s worth taking a closer look at this sector and identify which stocks to watch for potential buy opportunities. If you\u2019re 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\u2014prime candidates for a potential bounce.<\/p>\n

How can you spot these opportunities? One way is to use MarketCarpets\u2019 Bollinger Band Width<\/strong> setting.<\/p>\n

On Monday, I used this tool with the Latest Value<\/strong> 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 \u201csqueeze\u201d leading to a significant price move or a breakout.<\/p>\n<\/p>\n

FIGURE 1. MARKETCARPETS BOLLINGER BAND WIDTH SET TO LATEST VALUE. It won\u2019t be surprising if most of the big stocks on the list with the lowest value exhibit similar patterns.<\/span>Image source: StockCharts.com. For educational purposes.<\/span><\/em><\/p>\n

If you look at the table on the right, you\u2019ll see that the three biggest stocks with the lowest chart values are Visa<\/strong> (V), Mastercard<\/strong> (MA), and Berkshire Hathaway B shares<\/strong> (BRK\/B). If you were to continue scrolling, the three big banks with the narrowest Bollinger Bandwidths<\/a> are <\/span>Bank of America<\/strong> (BAC), <\/span>Morgan Stanley<\/strong> (MS), <\/span>Goldman Sachs<\/strong> (GS), and <\/span>JP Morgan Chase<\/strong> (JPM). <\/span>For many investors, some of these shares are quite expensive. So, let\u2019s consider that and focus on the stocks that are more relatively affordable to most readers: BAC, MS, and JPM.<\/p>\n

Before diving into these stocks, let\u2019s examine the sector\u2019s breadth using a daily chart<\/a> of the <\/span>S&P FInancial Bullish Percent Index<\/strong> ($BPFINA). We\u2019ll also compare the relative performance of the Invesco <\/span>KBW Bank ETF<\/strong> (KBWB) as a proxy for the large U.S. banking industry against the <\/span>Financial Select Sector SPDR<\/strong> (XLF), which represents the broader financials sector.<\/span><\/p>\n

Sector Breadth and Relative Performance of Banks vs. Sector<\/h2>\n

The $BPFINA shows the percentage of stocks signaling Point & Figure \u201cbuy\u201d signals. Right now, 91% of S&P financial stocks are flashing buy signals (see below).<\/p>\n<\/p>\n

FIGURE 1. FINANCIAL SECTOR BULLISH PERCENT INDEX. The Financial sector is bullish but potentially oversold.<\/span>Chart source: StockCharts.com. For educational purposes.<\/span><\/em><\/p>\n

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.<\/p>\n

Bank of America<\/h2>\n

Let\u2019s get to the stocks, starting with a daily chart<\/a> of BAC.<\/span><\/p>\n<\/p>\n

FIGURE 2. DAILY CHART OF BANK OF AMERICA. Is the stock poised for a big move up or down?<\/span>Chart source: StockCharts.com. For educational purposes.<\/span><\/em><\/p>\n

There\u2019s a lot here, so I\u2019ll bullet the key points:<\/p>\n

BAC\u2019s technical strength, as measured by the StockChartsTechnical Rank<\/a> (SCTR) is slightly declining, but at a level just below 70, it signals only slight weakness.<\/span>
\nThe Bollinger BandWidth has decreased significantly, and BAC\u2019s price is above the lower band. This doesn\u2019t signify a squeeze as much as a low volatility pullback. But what are the chances that BAC is likely to decline further?
\nOn a relative performance scale, BAC is slightly underperforming its industry, down barely 2%.
\nIn terms of momentum, there\u2019s a divergence between indicators: On Balance Volume<\/a> (OBV) suggests high buying pressure, possibly driven by retail investors, while<\/span> Chaikin Money Flow<\/a> (CMF) indicates strong selling pressure, likely reflecting institutional activity.<\/span><\/p>\n

BAC is one of the largest US banks, so I\u2019d add it to my ChartList<\/a> 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.<\/p>\n

How does BAC compare with Morgan Stanley?<\/p>\n

Morgan Stanley<\/h2>\n

Let\u2019s take a look at a daily chart.<\/strong><\/a><\/p>\n<\/p>\n

FIGURE 3. DAILY CHART OF MS. The stock\u2019s performance, as measured by SCTR, is performing slightly better than BAC.<\/span>Chart source: StockCharts.com. For educational purposes.<\/span><\/em><\/p>\n

MS\u2019s SCTR score, at 83, is stronger than BAC\u2019s and close to the 90 level, which might be considered exceedingly bullish.
\nAs 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.
\nMS is slightly outperforming its industry peers by slightly over 3%, better than BAC\u2019s relative performance.
\nSelling pressure, however, is strong, and the OBV and CMF appear to align.<\/p>\n

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\u2019d wait for a bounce and monitor a bullish reversal in both the OBV and CMF before considering a long position.<\/p>\n

JP Morgan Chase<\/h2>\n

Finally, let\u2019s look at the last big bank on my list: JP Morgan Chase. Below is a daily chart<\/strong><\/a>.<\/span><\/p>\n<\/p>\n

FIGURE 4. DAILY CHART OF JPM. The divergence in the OBV and CMF is something to watch carefully.<\/span>Chart source: StockCharts.com. For educational purposes.<\/span><\/em><\/p>\n

JPM\u2019s SCTR score of 76 is declining, yet still relatively bullish.
\nIts Bollinger BandWidth indication is similar to the two we just viewed. In JPM\u2019s case, traders seem hesitant to commit to any direction as price settles right below the middle band. It\u2019s as if they\u2019re waiting for some indication to trigger movement in one direction or another.
\n Regarding relative performance, JPM is barely outperforming its industry peers, by a little over 1%.
\nSimilar 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.<\/p>\n

JPM is sitting in a near-term holding pattern. It\u2019s 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\u2019s 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.<\/p>\n

At the Close<\/h2>\n

Planning the coming year, I focused on a given sector (Financials) and used MarketCarpets\u2019 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\u2019m 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<\/em> approach that might just come in handy given the right circumstances.<\/p>\n<\/p>\n

Disclaimer:<\/em><\/strong> 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.<\/em><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

As the year winds down, investors are beginning to position their portfolios for the New Year. I\u2019m 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 […]<\/p>\n","protected":false},"author":0,"featured_media":13082,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-13081","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/13081","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=13081"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/13081\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/13082"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=13081"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=13081"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=13081"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}