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.

Related Articles
  1. Investing

    With US Volatility on the Upswing, Take a Look at Asia

    Although the U.S. economic recovery appears to be gaining steam, lofty stock prices and rising geopolitical risks are finally taking a toll. 
  2. Economics

    More Volatility Ahead?

    Despite recent market swings, volatility is still low by historic standards, suggesting that markets aren’t taking into account the prospect of bad news.
  3. Trading Strategies

    How to Day Trade Volatility ETFs

    A primer on the ideal time to day trade volatility ETFs, and how to do it.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  6. Trading Strategies

    How To Buy Penny Stocks (While Avoiding Scammers)

    Penny stocks are risky business. If want to trade in them, here's how to preserve your trading capital and even score the occasional winner.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  8. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  9. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  10. Investing Basics

    5 Things to "Deliberately" Do to Improve Your Trading

    Most traders are putting in trading hours, but not improving. Here are deliberate steps that can take your trading to the next level.
  1. Securities-Based Lending

    The practice of making loans using securities as collateral. ...
  2. Head-Fake Trade

    A trade where a stock or market appears to be making a move in ...
  3. Crowded Short

    A trade on the short side with an overwhelmingly large number ...
  4. Fintech

    Fintech is a portmanteau of financial technology that describes ...
  5. Indicator

    Indicators are statistics used to measure current conditions ...
  6. Intraday Momentum Index (IMI)

    A technical indicator that combines aspects of candlestick analysis ...
  1. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!