Trying To Catch A Break
When a stock’s volatility contracts, there is a statistically significant
likelihood that a major move will occur in that same stock, as volatility reverts
to its mean.
10:20:17
Autozone (AZO)
is continuing to trade in a low-volatility, high level triangle. AZO is
currently down 0.65 to 66.65 and is holding a
3-month relative strength ranking of 93 from TradingMarkets.com.
Autozone
(
AZO |
Quote |
Chart |
News |
PowerRating) is a stock we have been following for
a while, as the volatility has been lower than normal. While we are anticipating
AZO’s upcoming move as the volatility reverts back to its average, the direction
is uncertain. The stock has room to drop in the event of a failure out of this
pattern, or could run higher if it breaks out of the top.Â
Some traders will
choose to only take the trade if an upside breakout and trend continuation
occurs, others are looking to short only in the event of a breakdown, and
options traders may be looking at a strategy like a straddle here. There are
several ways to play these low volatility situations, follow them in our new
Charts Ready to Explode list, and see how they can fit into your style and
methods of trading.
Until tomorrow,