Like Volatility? Trade These Four Stocks (TKMR,KNDI,ACHN,SFUN)
Volatility often gets a bad rap, but many short-term traders actually seek it out. Over the last 30 days these four stocks have averaged moves of more than 5% per day, offering big short-term potential for those willing to take on the risk. While investors and big funds are also trading and speculating in these stocks, with the current volatility these stocks are a short-term trader’s playground. Big intra-day movements mean large profits in a short amount of a time, or big losses if on the wrong side of the trade.
Tekmira Pharmaceuticals Corp. (TKMR) was trading near $10 in mid-July, and reached $26.05 on Aug. 8. After pulling back to $16.04 the stock looks to be pushing higher again. The 30-day average daily range of the stock is 10.65%; over the long term this sort of volatility can’t sustain itself, but right now there’s definitely a ton of action tp play off of. A drop below $18.50, and especially $17.50 (recent swing low), is likely to bring in selling pressure.
From January to May, the stock witnessed similar volatility, rising from $8, hitting $31.48 and then falling to $10.20. With a high potential for gaps and big moves at the open, which can wreak havoc on a stop-loss order, this is stock is more favored for day trading (no overnight positions) than swing trading. (For more, see: The Stop-Loss Order: Make Sure You Use It.)
Kandi Technologies Group Inc. (KNDI) has been the next most volatile stock over the last 30 days (with good volume), with daily average movement of 7.66%. From December through April, its price ran from near $7 to a high of $22.40, and then collapsed to $11. A strong run in July pushed the price right back to resistance, reaching a high of $22.49. Two failed attempts to push higher in August make the $22.50 region the clear line of resistance for this stock, and having just broken below a short-term trendline the short-term direction is biased to the downside. A rally through the resistance zone is likely to cause a strong buying surge, and is foreshadowed by a break above the upper trendline of a small triangle at $21. (For more, see: An In-Depth Look At Triangles.)
Achillion Pharmaceuticals Inc. (ACHN) has been moving strongly higher over the last few months, from around $2.75 in June to a high of $12.06 on Aug. 26. Over the last few sessions the stock has taken a breather, but remains close to that high. A break above the high likely means another spurt higher of a dollar to two. The stock is averaging daily movement of 5.85% over the last 30 days, as well as average volume approaching six million shares per day, making it a great day-trading stock. Most of the big movement has come from moves higher, so unless the company comes out with bad news, or the price sinks significantly, mostly focus on long positions on days when the intra-day trend is up. (For more, see: How To Trade Volatility ETFs.)
China’s Soufun Holdings Ltd. (SFUN) is actually a little tamer as of late, only moving 5.16% per day on average. This stock frequently sees spikes where average volatility approaches 10% per day. The stock bottomed out in June at $8.52 and has since put in a series of higher lows. There is resistance in the $12.80 region, so a break above that is likely to result in a strong move to the upside. On the other hand, a drop back below $10.50 could spook buyers and push the stock back toward the lows. In July and August, the biggest intra-day moves came from moves higher, although the downside still offers potential, as the current uptrend isn’t very strong at present. Short-term trading with the intra-day trend is key. (For more, see: The Most Volatile Stocks Intra-Day.)
The Bottom Line
While some analysis can be performed on these volatile stocks, anything can happen in a single day. If you opt to trade these stocks, realize that volatility is a double-edged sword. Be willing to cut losses quickly before they get out of hand, and allow for profits that are commensurate with the stock’s potential. For example, if day trading, and the stock is moving 5%, look to make 1% to 2% on a trade, while only risking a fraction of that. Swing traders should assess beforehand what their maximum loss is and their projected target. There is potential to make or lose more than you expect due to price gaps. If there isn’t a clear trend, it’s likely best to stay away or wait for one to develop. (For related reading, see: Watch These Stocks With Short-Term Volatility.)
Cory Mitchell does not own or have interests in any of the stocks mentioned in this article.
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Like Volatility? Trade These Four Stocks (TKMR,KNDI,ACHN,SFUN)
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