Finding Stocks in the Squeeze Zone: Using Finviz

For traders seeking high-potential opportunities, identifying stocks in the "squeeze zone" can be a lucrative strategy. This zone, characterized by the Bollinger Bands narrowing within the Keltner Channels, often precedes significant price movements. In this article, we’ll explore how to identify stocks in the squeeze zone, the significance of this setup, and how to use Finviz to find such stocks effectively.

Understanding the Squeeze Zone

The squeeze zone occurs when:

• The upper Bollinger Band is below the upper Keltner Channel.
• The lower Bollinger Band is above the lower Keltner Channel.

This setup indicates a period of low volatility, where the price is consolidating. As volatility contracts, it often signals an impending expansion or breakout, making it a critical point for traders to watch.

Key Indicators:

• Bollinger Bands: These bands are plotted at standard deviation levels above and below a simple moving average (SMA) of the price. They widen during high volatility and contract during low volatility.
• Keltner Channels: These channels are plotted using the average true range (ATR) around an exponential moving average (EMA) of the price. They provide a measure of volatility based on recent price movements.

Significance of the Squeeze Zone

When a stock is in the squeeze zone:

• Low Volatility: The market is in a phase of low volatility, often leading to a significant move when volatility returns.
• Potential Breakouts: Traders anticipate a breakout in either direction. A move outside the Bollinger Bands can signal the start of a new trend.
• Trading Opportunities: Identifying this setup allows traders to position themselves for potential breakouts, setting up trades with favorable risk-reward ratios.

Finding Squeeze Zone Stocks Using Finviz

Finviz is a powerful stock screener that can help traders identify stocks meeting specific criteria, including the squeeze zone setup. Here’s how to set the parameters in Finviz:

Step-by-Step Guide:

1. Visit Finviz: Go to Finviz.com.

2. Navigate to Screener: Click on the "Screener" tab at the top of the page.

3. Set Technical Criteria:

   • Pattern: In the "Technical" tab, select "Squeeze" from the drop-down menu. This preset option can help you quickly find stocks in a squeeze situation.
   • If "Squeeze" is not available as a preset, manually set the parameters:
     • 20-Day SMA Price above 50-Day SMA Price: This can indicate the stock is in a consolidating phase.
     • Bollinger Band Width: Set it to a low percentage to ensure the bands are narrow.

4. Additional Filters (Optional):

   • Market Cap: Choose a specific market capitalization if you prefer small-cap, mid-cap, or large-cap stocks.
   • Average Volume: Ensure there is sufficient trading volume by setting a minimum average volume (e.g., over 500,000 shares).
   • Price: Set a price range if you have a preference for stocks within a certain price bracket.

5. Run the Screener: Click "Screener" to view the list of stocks that meet your criteria.

6. Analyze Results:

   • Review the charts of the filtered stocks to confirm the squeeze zone setup.
   • Look for additional confirmations such as recent support/resistance levels, trading volume changes, or other technical indicators.

Practical Tips for Trading the Squeeze Zone

1. Confirm Breakouts: Wait for confirmation of a breakout beyond the Bollinger Bands before entering a trade. This can help avoid false signals.
2. Set Stop Losses: Use tight stop losses just outside the opposite Bollinger Band or recent support/resistance levels to manage risk.
3. Monitor Volume: Increased trading volume on a breakout can indicate the strength and sustainability of the move.
4. Combine with Other Indicators: Use additional technical indicators such as RSI, MACD, or moving averages to strengthen your analysis and trade decisions.