Three stocks on my watchlist are sitting at the edge of new highs…
Two of them are up more than 500% in the last year. The third is less than 1% away from its 52-week highs.
The next few days promise volatility. Big moves are coming…
When a stock hits new highs, the market has to make a decision.
Push through and keep running… or roll over and sell off.
Either way, the move tends to be volatile. And volatile moves are where options traders make the most money.
The best part is: I don’t care which way they go.
I just need them to move.
Breakout Price Action
Most investors want calm, steady price action.
Volatile price swings tend to scare people who put their retirement accounts in the stock market.
But we’re not investors… We’re options traders.
And options traders NEED volatility.
When a stock swings wildly, the underlying options contract moves exponentially compared to the actual percent change of the asset.
A larger percent change means there’s more meat on the table. Plus, we don’t have to time the move perfectly to take substantial gains.
When are stocks the most volatile?
When they’re flirting with new highs on a potential breakout.
Picture it…
There’s blue sky above the stock. Everyone watching realizes the next move could create a trajectory for the next few months.
- A strong push to new highs.
- A failed attempt and selloff.
There’s a lot at stake. That’s exactly the way I like it.
Potential Breakout Trades
There are three stocks at the top of my breakout watchlist…
But I’m not necessarily hoping they all break out.
I trade both sides of these setups.
- Stocks pushing higher.
- Stocks falling lower.
The breakout volatility ensures that we have enough room for sizeable gains no matter which direction the stock chooses.
My goal is to identify a direction and trade alongside the market’s momentum.
Here’s my breakout watchlist:
- Meta Platforms, Inc. (NASDAQ: META)
- Moderna, Inc. (NASDAQ: MRNA)
- Lumentum Holdings Inc. (NASDAQ: LITE)
All three of these stocks represent prominent businesses in the AI race. But the charts couldn’t be more different…
META is trading close to the open from 1 year ago. It’s less than 1% away from 52-week highs.
That might point toward a push higher. A lot of traders will realize the chart isn’t overextended, and it could use the 52-week highs as a launchpad for the weeks to come.
But the price just rejected new highs, which is a sign of bearish momentum.
This stock could go either way. Pay attention to the intraday price action and the recent support and resistance levels to determine a trajectory.
MRNA is on the other end of the spectrum…
It’s up 600% in the last year and just made new highs after an incredible gap up.
This is a chart that looks overextended. And a bearish pullback could be coming soon.
LITE sits somewhere in the middle.
The stock is up 530% in the last year, but it’s trying to rally off support from May after a multi-month consolidation and a more modest breakout to new highs (when compared to MRNA).
Breakout price action is some of the most volatile in the market.
Don’t waste these opportunities…
Get my next breakout trade alert.
Stay Street Smart,
Jeff Zananiri
