One of the simplest screens a short-term trader can run is for volatility and volume. My personal preference is to screen for stocks that have a daily average price range of greater than 5% over the last 60 days, and also have an average volume exceeding 4 million shares per day. I also add in a price constraint, only trading stocks above $10. Based on that criterion, these are the four most volatile stocks with significant volume, providing ample intra-day opportunity for traders.
BlackBerry (Nasdaq:BBRY) is prone to having some large intra-day moves. Based on the criterion, this is the most volatile stock of the list. The 60-day average volatility is 6.41% which means almost every day the stock has a significant swing. This has been especially true since the stock has broken out of its sideways lull; July through October 2011 the stock was trendless, and volatility dropped off. In November a surge to the upside signaled a potential change in direction and an escalation in volatility. Right now, this stock is primed for day and swing traders and volume is confirming that - average volume over the last 30 days is just over 70 million shares. That is strongest it has been in some time, and long-term traders should also take note of this strong buying interest.
Herbalife (NYSE:HLF) is the next most volatile stock over the last 60 days with a daily average range of 6.17%. The 30-day average volume is just over 15.5 million shares, which is very low historically speaking. This amped up volume, compared to the more usual 1 to 2 million shares in daily volume is presenting some big intra-day moves. After a big drop from near $45 down to $24.24 in December, the stock has stabilized somewhat in the middle, closing at $35.75 on Feb. 5. If this volatility is going to continue, volume will need to stay high. A drop back towards $24.24 is likely to cause a big stir again, as will a rise up towards resistance at $47.
SEE: Technical Analysis: Support And Resistance
The well-known department store chain J.C. Penney (NYSE:JCP) is posting a daily average (60) range of 5.06%. Since December, range-trading type strategies would have worked well as the stock has moved sideways. While volatility seems high based on the daily range, based on a historical context it isn't. If the stock moves out of this sideways channel expect volatility to increase. Look for a break above $21.75 or a drop below $17.35 or $15.65. Until that occurs, stick to trading the range as it still presents opportunities. Longer term traders should also keep an eye on these levels, as a breach of any of them is likely to forecast the direction of the next significant move. The 30-day average volume is 8.5 million shares, up just slightly from the volume levels seen over the last two years.
SEE: Interpreting Support And Resistance Zones
VIVUS (Nasdaq:VVUS) has the potential to be highly volatile. Currently, the stock's 60-day daily average range is 5.53%, yet on two occasions in 2011 the average would have been double that. The stock fell from above $30 (July 2011) to just below $10 (November), and has now stabilized between $11.89 and $15.54. A drop below $11.75 will get traders thinking the downtrend is continuing and volatility is likely to pick up further, especially if it starts heading towards the $10 mark. If the stock clears resistance and gets above $15.60, volatility is also likely to escalate. While the stock is still volatile relative to most stocks, I think the real opportunity in this one lies in waiting for a breakout of the levels mentioned. The 30-day average volume is just under 4.8 million shares, which is pretty standard over the last year.
SEE: The Anatomy Of Trading Breakouts
The Bottom Line
Screening doesn't need to take hours. If you're a short-term trader looking for volatility, screen for stocks that have consistently big intra-day ranges and solid volume. Day traders can focus on the intra-day moves, while swing-traders may want to wait for a break of a significant price level and the sharp (volatile) ensuing move. Usually these stocks will remain volatile for some time, as they are based on a 60-day average, but if volume begins to dry up or you notice the daily range starting to shrink, abandon the stock and re-run the screen to find a new batch of volatile stocks.
Charts courtesy of stockcharts.com
At the time of writing, Cory Mitchell did not own any shares in any company mentioned in this article.