We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
When value or growth investing fails to fetch sustained profits, one should explore another time-tested winning strategy that simply bets on the frontrunners.
In other words, one of the most successful strategies today is to invest in momentum stocks at the right time.
Momentum is basically the tendency of winning stocks (i.e. stocks that have outperformed the market in recent times) to keep winning and losing stocks to keep losing. It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction.
At the core, momentum investing calls for investors to “Buy High, Sell Higher.” Thus, this strategy calls for hitching a ride on a fast-moving train, without fretting about valuations or growth prospects.
How Does Momentum Strategy Work?
There is a simple reason to this. It works because we are humans!
There’s a whole laundry list of behavioral biases that most investors exhibit, and these emotional responses and mistakes are the very reason that momentum strategy works. For instance, we all know of investors who are afraid to book losses, and hence hold onto losing stocks for too long, hoping that they will spring back to their original prices. On the other hand, investors sell their winners way too early.
Furthermore, investors initially tend to under-react to news, events or data releases. However, once things gain clarity, they tend to go with the flow and overreact, causing dramatic price reactions.
These behavioral problems extend trends, and thus open up huge opportunities for momentum players. So basically, it’s a way to profit from the general human tendency to extrapolate current trends into the future.
Momentum investing is based on that gap in time that exists before the mean reversion occurs, i.e. before prices become rational again.
Chase the Alpha
Momentum strategies have been known to be alpha-generative over long periods of time and across markets. So obviously, this strategy is quite tricky to implement, as detecting these trends is no child’s play.
Here, we have created a strategy that will help investors get in on these fast movers and make handsome gains. Our screen will help you advantage from both long-term price momentum and a short-term pullback in price, which would reflect some profit-taking in the stock.
Screening Parameters
Percentage Change Price (52 Weeks) = Top #100: This item selects the top 100 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get stocks that have appreciated the maximum over the past one year.
Percentage Change in Price (1 Week) = Bottom #50: From the above 100 stocks, we then choose those that are also among the 50 worst performers over a short one-week period.
Zacks Rank #1: No matter whether the market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Momentum Style Scoreof B or better: A top Momentum Style Score knocks out a lot of the screening process as it takes into account several factors including volume change and performance relative to its peers. It indicates when the timing is the best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum Style Score of 'A' or 'B,' when combined with a Zacks Rank #1 or #2 (Buy) handily outperform other stocks.
Current Price greater than 5: The stocks must all be trading at a minimum of $5.
Market Capitalization = Top #3000: We have chosen stocks that are among the top 3000 in terms of market value to ensure strong liquidity.
Average 20-Day Volume greater than 100,000: A substantial trading volume makes certain that these stocks are easily tradable.
Here are five of the 10 stocks that made it through this screen:
Amazon.com, Inc. (AMZN - Free Report) , which is engaged in the retail sale of consumer products in North America and internationally, has gained nearly 44% over the past one year and carries a Momentum Style Score of ‘B’.
Burlington Stores, Inc. (BURL - Free Report) operates as a retailer of branded apparel products in the United States. The stock has appreciated almost 60% in the past one year and has a Momentum Style Score of ‘B’.
Sanderson Farms, Inc. , an integrated poultry processing company, has rallied over 27% over the past one year and has a Momentum Style Score of ‘A’.
Ariad Pharmaceuticals Inc. is an oncology company engaged in the discovery, development, and commercialization of drugs for cancer patients globally. The stock has soared nearly 58% over the past one year and sports a Momentum Style Score of ‘A’.
Glaukos Corporation (GKOS - Free Report) , an ophthalmic medical technology company focused on products and procedures designed for the treatment of glaucoma, has gone up by over 63% over the past one year, and has a Momentum Style Score of ‘B’.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Play the Momentum with These 5 Fast-Paced Stocks
When value or growth investing fails to fetch sustained profits, one should explore another time-tested winning strategy that simply bets on the frontrunners.
In other words, one of the most successful strategies today is to invest in momentum stocks at the right time.
Momentum is basically the tendency of winning stocks (i.e. stocks that have outperformed the market in recent times) to keep winning and losing stocks to keep losing. It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction.
At the core, momentum investing calls for investors to “Buy High, Sell Higher.” Thus, this strategy calls for hitching a ride on a fast-moving train, without fretting about valuations or growth prospects.
How Does Momentum Strategy Work?
There is a simple reason to this. It works because we are humans!
There’s a whole laundry list of behavioral biases that most investors exhibit, and these emotional responses and mistakes are the very reason that momentum strategy works. For instance, we all know of investors who are afraid to book losses, and hence hold onto losing stocks for too long, hoping that they will spring back to their original prices. On the other hand, investors sell their winners way too early.
Furthermore, investors initially tend to under-react to news, events or data releases. However, once things gain clarity, they tend to go with the flow and overreact, causing dramatic price reactions.
These behavioral problems extend trends, and thus open up huge opportunities for momentum players. So basically, it’s a way to profit from the general human tendency to extrapolate current trends into the future.
Momentum investing is based on that gap in time that exists before the mean reversion occurs, i.e. before prices become rational again.
Chase the Alpha
Momentum strategies have been known to be alpha-generative over long periods of time and across markets. So obviously, this strategy is quite tricky to implement, as detecting these trends is no child’s play.
Here, we have created a strategy that will help investors get in on these fast movers and make handsome gains. Our screen will help you advantage from both long-term price momentum and a short-term pullback in price, which would reflect some profit-taking in the stock.
Screening Parameters
Percentage Change Price (52 Weeks) = Top #100: This item selects the top 100 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get stocks that have appreciated the maximum over the past one year.
Percentage Change in Price (1 Week) = Bottom #50: From the above 100 stocks, we then choose those that are also among the 50 worst performers over a short one-week period.
Zacks Rank #1: No matter whether the market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Momentum Style Scoreof B or better: A top Momentum Style Score knocks out a lot of the screening process as it takes into account several factors including volume change and performance relative to its peers. It indicates when the timing is the best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum Style Score of 'A' or 'B,' when combined with a Zacks Rank #1 or #2 (Buy) handily outperform other stocks.
Current Price greater than 5: The stocks must all be trading at a minimum of $5.
Market Capitalization = Top #3000: We have chosen stocks that are among the top 3000 in terms of market value to ensure strong liquidity.
Average 20-Day Volume greater than 100,000: A substantial trading volume makes certain that these stocks are easily tradable.
Here are five of the 10 stocks that made it through this screen:
Amazon.com, Inc. (AMZN - Free Report) , which is engaged in the retail sale of consumer products in North America and internationally, has gained nearly 44% over the past one year and carries a Momentum Style Score of ‘B’.
Burlington Stores, Inc. (BURL - Free Report) operates as a retailer of branded apparel products in the United States. The stock has appreciated almost 60% in the past one year and has a Momentum Style Score of ‘B’.
Sanderson Farms, Inc. , an integrated poultry processing company, has rallied over 27% over the past one year and has a Momentum Style Score of ‘A’.
Ariad Pharmaceuticals Inc. is an oncology company engaged in the discovery, development, and commercialization of drugs for cancer patients globally. The stock has soared nearly 58% over the past one year and sports a Momentum Style Score of ‘A’.
Glaukos Corporation (GKOS - Free Report) , an ophthalmic medical technology company focused on products and procedures designed for the treatment of glaucoma, has gone up by over 63% over the past one year, and has a Momentum Style Score of ‘B’.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »