We’ve all heard about how the market is trading on lower volume. At first, everyone thought it was just the typical summer doldrums that always result in fewer shares trading hands. But the trend persisted into September, leading many to speculate whether confidence among retail and institutional investors — or lack thereof — could stall the market’s rally.
You’ve no doubt heard the saying, “There’s always a bull market somewhere.” By the same token, there’s always a stock or ETF that is enjoying increased volume. But you may have to do some digging to find it. Or you can let us do the legwork.
One such stock is J.C. Penney Company, Inc. (NYSE: JCP), which has surged an eye-popping 39% in September amid an increase in trading volume.
The stock jumped more than 3% Wednesday, on the heels of the company’s unveiling of a plan to grow revenue by $1 billion by 2015 through new store openings and store renovations.
The pop pulled the shares above their 200-day moving average, a trendline they last closed above in late April. The stock has also powered through several strikes with heavy call open interest, which is a sign of strength. And for those who like Fibonacci lines, the stock blew through a 50% retracement of the decline from the April high to August low (the next line is 5% above the current share price).
Helping the shares along their upward trajectory could be unwinding pessimism among analysts and options players. The put/call ratio is looking ready to drop from a relative peak, while just 5 of 14 analysts currently rate the stock a “buy,” leaving plenty of room for upgrades. And there’s enough short interest for a short squeeze to add some fuel to the fire. (See 5 Stocks Set to Rally in a Short Squeeze.)
With little overhead resistance on the chart, the holiday shopping season right around the corner, and plenty of pessimism available to unwind into more buying power, we think JCP’s rally has plenty of gas left in the tank.
For options traders, play a November option to take full advantage of the rally’s follow-through. The at-the-money JCP Nov 27 Calls fit the bill quite well.
Editor’s Note: After the close on Wednesday, Chris Johnson appeared on CNBC’s “Closing Bell” with Maria Bartiromo, where he discussed several ETFs that are bucking the recent market trend of lower trading volume. Click here to view the CNBC segment.
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