4 Stock Picks with Bollinger Band Buy Signals

COF, FITB, HOLX, and UNH are potential stocks to buy, from a technical and sentiment perspective

Jan 25, 2017 at 1:28 PM
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Earlier, Schaeffer's Senior Quantitative Analyst Rocky White identified 20 stocks to buy based on a pair of historically predictive indicators. One such indicator was Bollinger Bands, as stocks that fall below the lower band tend to outperform. We asked Senior Trading Analyst Bryan Sapp which names on the list looked most attractive from a sentiment and price perspective, and he identified Capital One Financial Corp. (NYSE:COF), Fifth Third Bancorp (NASDAQ:FITB), Hologic, Inc. (NASDAQ:HOLX), and UnitedHealth Group Inc (NYSE:UNH).

bollinger band top stocks jan 25

COF looks "really good," according to Sapp, due to its long-term strength. Since the U.S. presidential election, the stock has added almost 21% to trade at $88, despite dropping 0.8% today on an earnings miss. Making the shares all the more attractive is what appears to be a stern foothold at the ascending 50-day moving average, as well as potential for skepticism to unwind on the Street.

For instance, 11 of 19 analysts rate COF a "hold" or worse, leaving the door open for upgrades. In fact, KBW, BMO, and Oppenheimer all just raised their price targets on the financial stock. A capitulation among option bears could add fuel to the fire, too. COF sports a 10-day put/call volume ratio of 2.11 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Though, of course, a portion of these put buyers could be shareholders hedging (which applies to the securities below, too).

cof daily bollinger bands jan 25

FITB has been a major outperformer on the charts, as well, aided by its 50-day trendline. At $26.80, the shares have soared 76% year-over-year. Yet, 92% of analysts rate the stock a "hold" or "strong sell," and the latest attention has been mostly negative, even after yesterday's earnings beat. Specifically, Oppenheimer lowered its assessment to "perform," while BMO and Wedbush trimmed their price targets -- as opposed to Baird, which lifted its target price. All things considered, there's room for upgrades if the equity can sustain its long-term course.

Not to mention, FITB's 10-day ISE/CBOE/PHLX put/call volume ratio stands at a top-heavy 6.84 -- in the 89th annual percentile -- while its Schaeffer's put/call open interest ratio (SOIR) of 3.07 is just 2 percentage points from a 12-month peak. If these put players hit the exits, it could create tailwinds for the bank shares. Those looking to place short-term bets on FITB are in luck, too, as its Schaeffer's Volatility Index (SVI) of 28% ranks in the bottom quartile of its annual range.

HOLX is another potentially attractive pick, benefiting from double-barreled support at its 50-day moving average and the $39 level -- a former layer of resistance. Since its early November low at $35.15, the healthcare stock has exploded over 13% to hover at $39.82 -- despite bucking its previously bullish trend post-inauguration. This could send option bears to the hills, as HOLX's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.32 ranks in the 83rd annual percentile, while its SOIR sits just 1 percentage point from a 52-week peak, at 1.63.

It's a similar story with respect to insurance issue UNH. At $161.70, the stock has trekked 42% higher in the past 12 months, and recently found a foothold at its 50-day trendline. Yet, options speculators have rarely been so put-skewed toward the shares. UNH sports a top-heavy SOIR of 1.58, registering just 5 percentage points from a 12-month high. An unwinding of bearish put traders could add fuel to the stock's proverbial fire.

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