MKM told clients to buy high-beta stocks instead of low-volatility names as technical factors such as a tight trading range and strong breadth point to further upside.
"Despite the big run [already in high-beta stocks versus more stable stocks], we think this trend is likely to continue," MKM chief market technician Jonathan Krinsky wrote in a note to clients Sunday.
Riskier stocks outperformed low-volatility names in the consumer staples, telecom and utilities sectors by 15 percent since early July, according to the technician. Krinsky cited how the 20-day average trading range has narrowed to the lowest levels since mid-2014, which historically hasn't presaged stock prices going down.
"While new highs in breadth do not prohibit small market pullbacks, it would be unusual to see a 'significant' market top without a meaningful breadth divergence. Cumulative advance-decline lines for the SPX and NYSE, as well as the percentage of SPX stocks above the 200 DMA are at new highs," he wrote.
Here are 3 high beta stocks Krinsky recommends to take advantage of the trend.
