Trading Momentum Stocks
Trading momentum stocks works for two basic reasons. It has been demonstrated that stocks that have been performing well tend to continue to outperform the rest of the stock market.
A free daily list of the 50 highest-momentum stocks in our database is at Momentum List 2. A free daily list of stocks that just surged at least 2% in price and 50% in volume is at Surges 3. A free daily list of stocks making new highs is at New Highs 4.
But whatever you do, don't jump into hot momentum stocks, with tens of thousand of dollars, and then try to figure out what the long-term prospects of the company are. This mistake is all too common and can be very costly.
Averaging down solely to comfort yourself.
Namely, momentum stocks are generally in the focus of most investors. This means that the price of the stocks and the P/E may be already high, which leads to your inability to purchase them cheap. The price will quickly fall when a small decrease in the earnings is experienced.
Factor ETFs pool companies or stocks with similar qualities or attributes: value stocks, small or large companies, momentum stocks or even metrics such as return on equity.
There are all sorts of reasons someone may want to add factor-based ETFs to their portfolio.
We were discussing the wisdom of playing long-term shorts on momentum stocks like (PCLN), (NFLX), (OPEN) and (CMG) this weekend and my thought regarding whether NFLX should be used as a "focus short" (the kind we stick with and roll along) was: ...
ShootingStarr54: do you get all hung up on the major indexes spx etc confirming what your stock
Toni: Not really shooting star. I like it if they do, but if dealing with news and momentum stocks then it is not as important.
ShootingStarr54: thanks ...
Pullbacks in runaways usually last no more than a few days. Although those momentum stocks may be very volatile intra-day, for the agile, disciplined trader, this volatility offers opportunity. Since momentum begets momentum, I stalk the highest-momentum names for signs of continuation.
Research shows that stocks which have exhibited strong performance over some defined historical period, have a tendency to continue to exhibit strong performance for some number of future periods. It means that investors can potentially hitch a ride on strong momentum stocks.
media stocks such as LinkedIn (NYSE:LNKD), Groupon (NASDAQ:GRPN), and Facebook (NASDAQ:FB) have been leading the market and have turned into the momentum players' favorite trading and investing names. Many social media stocks have characteristics that are typical of momentum stocks, ...
momentum (technical-based) day or swing traders - they trade on high momentum stocks, in which it has high volatility. They need their orders executed lightning fast, and may need to get out quickly if the market goes against them.