CNBC screened the S&P 500 for stocks trading close to 52-week highs that have not made new highs recently. They found financials. Banks and insurance companies are almost at the finish line. Almost. They're right there. Any day now.
A near-breakout is not a breakout. It's the technical analysis equivalent of saying your car almost starts. Your portfolio almost made you money. Your wife almost came back.
The screen excluded stocks that already made new highs recently because those would be actual breakouts. Can't have that. We need stocks that looked promising three months ago and have been edging ever since. Financial sector has the deepest bench of these blue-balled chart patterns. Dozens of them. A whole roster of stocks that got close and then just hovered there like a drone over New Jersey.
Retail traders love this setup. They see a stock two percent from a 52-week high and think they've discovered alpha. They buy calls expiring Friday. The stock trades sideways for six weeks. They buy more calls. Different strikes, same result. By month three they're in a Reddit thread explaining how market makers are suppressing the breakout through synthetic short ladders.
The premise assumes breakouts matter. They don't. A stock hitting a 52-week high tells you it's higher than it was sometime in the last year. Congratulations. You've identified that numbers can go up. This is the insight you're trading on.
CNBC built a screener to find stocks that might do something soon based on the fact that they haven't done it yet. The financials sector has the most candidates. Which means if you're hunting for stocks about to break out, you should buy the sector where dozens of them have been threatening to break out for months and haven't.
That's not a bullish signal. That's resistance.
Photo by Maxim Hopman on Unsplash
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