By: Marc Sperling
During December, the market was creating what some call a “springing coil”–volatility and price were both contracting. When that happens, the longer the contraction lasts, the larger the subsequent explosion when the range is broken. After a breakout, we then look for volatility and price expansion. Yesterday, the New Year started with a powerful upmove in the broader indices. Today we are seeing the bullish action spread to other sectors (like the insurers), while the indices digest the initial breakout move.
One formerly volatile stock that I like to follow looks particularly ready to explode out of a narrow range: Garmin (GRMN). The stock has been consolidating in a $2 range for nearly two months. With the market pushing higher to start the year, I am closely watching this stock for a breakout above the recent range. A move above $32.50 opens up the potential for a much larger move, with a first target of $36 and a second target of $38.
