CME Group is the IBD Stock Of The Day for Monday. Fueled by high volatility, shares of the futures exchange operator are moving out of a buy zone to record highs while the rest of the market continues to tumble.
Chicago-based CME Group offers investors leverage and hedging opportunities across various asset classes, including agricultural products, energy, equities, metals and interest rates.
Market uncertainty and volatility are boons for CME Group, as they drive higher derivatives trading volume — which translates to higher profits.
Raymond James on Monday upgraded CME stock to outperform from market perform, The Fly reported. Analyst Patrick O'Shaughnessy wrote that CME's suite of risk management tools help position the exchange well amid the volatile global macroeconomic and geopolitical backdrop. That has been reflected in CME's strong trading volumes so far this quarter, O'Shaughnessy added. CME's rate futures volumes have been trending ahead of forecasts, while Treasury futures have been "notably robust." Meanwhile, concerns regarding the competitive landscape and the impact of Federal Reserve rate cuts have been fading.
Raymond James has a 287 price target on CME stock.
Meanwhile, CME in February recorded a 12% increase in average daily trading volume year over year. That included a record-breaking 67.1 million contracts traded on Feb. 25. Trading volumes appear to be accelerating. CME in January recorded a 2% increase in average daily trading volume.
The trading update comes after CME Group on Feb. 12 cleared Q4 estimates with earnings of $2.52 per share adjusted on $1.53 billion in revenue. FactSet analysts expected earnings of $2.45 per share on $1.51 billion in revenue.
The exchange's full-year revenue increased 10% to a record $6.1 billion.
For income-focused investors, CME stock offers an attractive 4.1% dividend yield, with a five-year compound annual growth rate of 28%.
CME Group Stock
CME stock on Monday rose 2.8% to 261.72, above a 249.02 buy point for a cup base. Shares first broke out above the entry on Feb. 12. CME is now slightly extended from the current buy zone, which extends 5% beyond the buy point, stretching to 261.47.
However, investors could also use 253.53 as an alternate entry for a high handle. CME stock is still in range of that entry.
CME stock hit a record high Monday, eclipsing the peak set in February 2022.
The relative strength line has been surging in recent weeks and rising since July. The RS line, which tracks a stock's performance vs. the S&P 500, had been trending lower for nearly five years.
CME stock has a 21-day ATR of 1.85%. The average true range is a metric available on IBD's MarketSurge charting tool. It gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
In the current, unpredictable market, IBD suggests stocks with ATRs of 3 or below.
Elsewhere, Intercontinental Exchange served as Friday's IBD Stock Of The Day. Shares are trading above a 167.99 buy point for a cup base, and hit a record high of 175.41 last Monday.
ICE has a favorable ATR of 1.6%.
CME rival Cboe Global Markets has been flirting with its own 216.82 buy point for a cup-with-handle base. Cboe has a 21-day ATR of 2.59%.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
