Momentum Market: A Stock Trading Risky Play

Best Growth Stock – A momentum stock is one that’s exhibiting a quick and sustained price movement. The essential cause for that price movement can change nonetheless, and the sensible momentum financier will search for the source of the momentum. In a high-risk environment, what lies underneath can diminish or worsen the chance. The least dangerous momentum play is a stock whose underlying cause for momentum is a serious event , for example takings growth. A stock whose powerful price momentum is founded upon takings momentum in current quarters has an improved chance of sustaining short term momentum in the stock market today than do other stocks. Takings expansion could also turn an undervalued stock into a less dodgy momentum play as stockholders discover the stock and start to bid up the cost.

An alternative way to minimize the possibility of investing in a momentum stock is to find one in a top-performing industry group or sector. A rising tide lifts all boats, and when a sector or industry group rises to the top, for who knows what reason, the top stocks in that group are buoyed by the group momentum.

The latest example was the Web sector during 1998 and 1999. A stock whose underlying cause for momentum is that it is a part of a top-performing group is probably going to keep its momentum so long as the group is on a roll. So it is shrewd to spot industry groups with the best positive momentum and then target stocks in those industry groups.

More dodgy are those stocks whose price momentum relies on rumors of alliances or takeovers or a new release release. If the event falls thru, the stock will probably retrace the majority of its move. The least fascinating and most dodgy are stocks whose underlying momentum is founded upon trader activity, bulletin board and bulletin boards, or a mention in the media by some researcher or pundit. These stocks are the most exposed to reversals and major drops as the underlying causes are based entirely on perception. When the perception changes which it can in a flash the stock can melt down so quick that no exit technique in the worlds can get you out unhurt.

THE INVESTING PROCESS FOR MOMENTUM

Financiers In momentum investing, all 3 steps in the investing process are important, particularly for short-term investors who need to make lots of money quickly on a stock. Due to the pacy nature of momentum investing, it’s vital to choose the right stocks, to outline obviously your exit and entry secrets, and to keep a really close eye on your portfolio. Stock Selection Methods : trying to find a new big Wave Momentum stocks are rather tough to find, because after you identify a stock that’s making a move you need to then discern the fundamental cause for the move. The least risky stocks are those whose momentum relies on revenues, basic worth, or good industry group performance.

The most unattractive stocks have momentum based mostly on rumors, day-trading activity, notice boards, or chat rooms. Investor’s Business Daily has developed 2 signals that will help you identify stocks with price and revenues momentum along with industry groups with momentum. Investor’s Business Daily’s price rank indicator identifies the top stocks and industry groups that have exhibited quick price movement over reasonably brief time periods, and IBD’s revenues rank indicator identifies stocks which have been exhibiting a period of takings momentum in latest quarters. Investor’s Business Daily publishes daily list of top price rankings and top takings ranking. Maybe the most effective way to spot momentum stocks is with a good screening programmer. If you are a top-down financier, you may first need to find the industry groups with the best momentum and the screen those groups for the best momentum stocks. Keep in the screen those groups for the best momentum stocks. Take into account that industry groups can only become top-performing groups if the majority of the stocks in the group have recently exhibited heavy momentum, so you need to be careful when using this techniques to select momentum stocks. You may either look for groups that are just starting to revolve upward the ones that could have been out of popularity and are just now moving into favor.

Then keep an eye open in the stock market for the top momentum stocks in those groups, which are the stocks that are pushing the group upward. Otherwise, you can glance at the current top-performing groups and search for stocks inside those groups that still haven’t revolved upward and that merit to do it.