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Momentum Stocks

Momentum Stocks

Momentum Stocks
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Stocks with the greatest 10-day momentum out of an 8000+ stock database are listed for subscribers.  We display the price, percent change in price, percent change in volume and 10-day momentum (in that order and ranked by their 10-day momentum).  Momentum is similar to price-rate-of-change.  The difference is that momentum is expressed as a ratio, and price-rate-of-change is expressed as a percent.  Both are "momentum" measurements. 

It is often possible to catch a stock early in a sustained move by monitoring stocks that have undergone a recent momentum surge.  The 100 stocks with the greatest 10-day momentum are listed.  Momentum is expressed in percentage terms rather than as a ratio.  Remember that a high 10-day momentum figure does not necessarily mean a viable trend has begun.  There may be nearby overhead resistance to any additional upside movement.  If there is, you should either wait and see if the stock breaks through that resistance or look elsewhere.  Look at the stock's 3-year chart and it's 1-year chart to get a sense of the context for the recent momentum.  Is the stock accelerating after touching its rising trendline, breaking through its upper Bollinger band, bursting through the neckline of an inverted head-and-shoulders formation, or breaking through the upper resistance boundary of an ascending triangle?  Look for such things to validate that the momentum is probably the beginning of a significant move.

Extreme readings are likely to precede a continuation of the upside movement.  Check a stock carefully before you buy it.  A momentum surge may result because of a possible takeover.  In such cases, a stock will usually gap up to a certain level then level off with little price change from then on (it goes relatively flat).  There might be another surge later if the potential buyer is forced to offer more, or the stock may stay there for up to a few months and then plummet if the takeover collapses.  In short, the upside move may already be over (just Google the name of the stock with the word "merger" and/or "takeover" to see if there is merger news).  You could also go to Yahoo Financial and type in the symbol.  Usually any significant news items will appear there.  We believe it is better to look for stocks that have not spiked up abruptly because of a possible merger, and that you make sure there is no nearby resistance overhanging the stock.  We also think it is best to avoid any high-momentum stock that has negative volume momentum. 

Why do we use 10-day momentum?  We have a service listing stocks with the greatest persistent strength. They generally have more established trends. However, some people are nervous about investing in such stocks because they think the trend may end soon.  They doubt the stocks will "persist" in their strength.  We do not necessarily agree with that though is it sometimes true.  Nevertheless, we think people should invest where they are most comfortable. If a person wants to find stocks that are in the earliest stage of an uptrend, then stocks with the greatest 10-day momentum is a good place to look. When a stock is bought on an early surge, there is no guarantee that the surge will turn into a long-term trend. On the other hand, when a person invests in a stock that has an established trend, there is no guarantee that the trend will continue. By providing lists of stocks with the greatest 10-day momentum in one subscription, and stocks with the greatest persistent strength in another subscription, we hope to satisfy both types of investor. 

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