Are you watching this volatility squeeze? Here’s your trading plan for CME group (CMG) tomorrow. (September 06, 2017).


Let’s look at CME ( NASDAQ:CME ). This is a stock that has had some active discussion in the forum, so I want to go through this. First of all, the Bollinger Bands (I have just stretched the line down here), they are like 2.5 percent so this is in a volatility squeeze, by definition. You can see how this thing was setting up. I would look and say, “Alright, resistance is right around 128.00, that is the line in the sand. If the stock starts trading above 128.00 then that is when we want to be in, right?”

Here is the issue though: We finally got this breakout today, and this could turn out to be a really good tomorrow. The stock rallied, heavier than average volume and then here it goes big-time. Yay! This is awesome! Wonderful. The only problem is, and the reason it is down like this is because it goes ex-dividend tomorrow. They pay, I think it is 66 cents, something like that. Tomorrow will be the first day that if you own the stock you are not getting that dividend. So it will open, it should be, theoretically, opening tomorrow, if it were to open flat it would actually be 60 cents less than the stock closed today.

For me, here is my trade: I want to see this stock start rallying higher. Whether your buy-point is above today’s close, which is 128.42, whether the stock moves back up above there; or whether you are waiting for it to break out to an all-time high, 129.31, you are really not sacrificing that much to make sure that there is serious buying pressure here. For all we know the big move today was just dividend capturing.

The stock is in a squeeze, it has been in a pretty wild base. But lately this stock has been just kind of flattening out, the trading range has been narrowing. In fact, now it is just narrow. So if this stock continues to move higher tomorrow, I think this is a good buy-point. From a fundamental standpoint, frankly there is not a darn thing that is compelling about the fundamentals, it is just not my deal. It is not really growing that much at all, but technically this stock looks good. So, wait for the stock to open ex-dividend. And then if it starts trading back to a new high I think this is a stock that you can buy. Then you would put your stop actually fairly tight, like right down there. Because if the stock falls back into the range why do you want to own it?

Free Chart

Leave a Comment