Stock Screening Education
Screening for Momentum
Momentum trading has existed for as long as markets have openly traded, and has proven to be a very valuable tool for many an investor.
Momentum Trading is an investment style that aligns investors with securities that are reacting to sentiment. The goal is to take advantage of any short-term or long-term opportunities provided by the prevailing trend.
Momentum, within an individual security or entire sector, is a product of either anticipated or actual earnings, and is reflected in share price movement and volatility. There are plenty of circumstances that can create momentum.
Some momentum investors like to see earnings estimates upgrades, while others may want to focus on stocks that are establishing new 52-week highs. The specifics of the style are truly left to the investor to totally customize. But either way, there is a long list of criteria that momentum investors can draw from in order to create their own highly personalized style.
How To Use
Momentum criteria should be used to narrow down a list of stocks for further, more detailed examination. The previously mentioned criteria, and many other possible momentum criteria, can be found in the Zacks Custom Screener section under both the fundamental and technical categories. This is the program that enables the investor to enter their specific momentum criteria. Take a look at the "screen-shot" below. As you can see, it contains categories for such items as estimate revisions and price ratios.
Improving Your Momentum Screening Results
The Custom Screener has plenty of excellent capabilities that can assist investors in identifying winning stocks. But the Research Wizard screening program has more advanced capabilities that can help investors even further refine their approach, and also, very importantly, back test any given strategy to gauge its historical performance in different market environments.
The Research Wizard allows an even more refined approach to developing a momentum screening strategy. For example, Research Wizard has the capability to target specific industries using a coding system. When a specific, high-growth industry is identified, the investor can then apply their momentum criteria to the returned list of stocks in order to determine which are the most attractive.
After making small adjustments in even the most minute criteria, an investor can then back-test the changes using Research Wizard in order to determine how they have impacted historical performance patterns. This is an incredibly powerful tool when trying to concoct just the right combination of fundamentals and technicals. For example, lets think about the difference between filtering for stocks that are within 85% of their 52-week high and stocks that are within 95% of their 52-week high. Adjusting these parameters will have a significant effect on the stocks that have been screened, and consequently, the results that have been and will be produced.
Creating momentum investment strategies and using the Zacks Custom Screener and Research Wizard to execute these ideas enables the investor to mine through millions of data sets in order to identify stocks that match their specific criteria, and deliver excellent short-term or long-term results.
Additional Zacks Resources
Momentum Investing Portfolio-Zacks professionally managed portfolio of momentum stocks.
Zacks Custom Screener-Zacks screening program that helps investors find great stocks.
Zacks Method for Trading-Learn from the pro's how to develop customized trading strategies.