Back to top

Image: Bigstock

Investors: Here's Where the Money Is

Read MoreHide Full Article

Legend has it that the notorious gangster Willie Sutton was once asked why he robbed banks. His answer was seemingly obvious, yet remarkably poignant:

"Because that's where the money is."

So when investors ask me why I prefer momentum stocks, I can't help thinking about this same quote. To me, it's obvious and I strongly believe that everyone should follow suit. That's because momentum stocks are the high fliers in every market environment. They offer the highest reward in the shortest amount of time.

The goal of this article is equally as simple. I want to show you the 4 steps in finding the best momentum stocks so you can enjoy the rewards in the months and years ahead.

Step 1: Screening

It begins with an initial screening process to help me find stocks to put on my radar. I look for Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy) stocks that:

• Have recently surprised earnings to the upside
• Have had earnings revisions to the upside in the last month
• Have outperformed the market
• Are within earshot of their 52 week highs

Continued . . .


Don't Wait for Monday's Market Bell

Today, gain instant access to Zacks' 9 hottest momentum stocks. You'll also be first in line for a brand-new pick with exceptional gain potential that will post Monday morning.

Most stocks that break out to new highs fizzle like shooting stars. Only a few continue their breakout momentum. Don't miss this chance to access our rare picks and discover how we find them.

What's more, you can download our Special Report free: Zacks' 7 Best Stocks for the Next 30 Days. Hurry, this opportunity ends midnight Sunday, June 11.

Click here for our best momentum and short-term stocks >>


This helps me dwindle down the stock universe to about 40 high quality names with great earnings stories and fantastic price momentum. Then I can laser focus in on stocks with the highest likelihood of short term performance, deeply rooted in the proven Zacks Rank methodology.

Step 2: Trend

From the 40 or so potential investment ideas generated from the screen I check to see which stocks are in an uptrend. There are many ways to do this and I could make this as complex as I'd like. However, in my experience the simplest approach is the best.

I choose an intermediate term moving average and compare price to the average. If the stock is above the average then it's in an uptrend. I'm not looking for turnaround stories or stocks that are value plays, I'm looking for momentum stocks. I only buy stocks in an uptrend.

Step 3: Trace

Chart by chart, I look for areas of support and resistance. I find historical price levels where the stock has been bid and areas where a rally died out when buyers shied away.

If the stock has had a long run, I use retracement percentages of the move in order to find potential support for a sell-off in the future. I look for stocks that are closest to their support levels and farthest from resistance.

This gives me a great risk versus reward scenario. I always look for stocks that have at least a 2:1 risk versus reward ratio in order to give me a mathematical edge over time. Just like the house has the edge in the casino. I want to be the house.

Step 4: Trigger

The last step is the most important. After identifying the quality names that are in uptrends that have a great risk versus reward ratio, I then need to figure out when to buy. For this I use a short term indicator known as the fast stochastics as my trigger.

The stochastic indicator is great because it tells me whether a stock is overbought or oversold and it tells me when the stock is at a turning point. It's very clear cut in black and white and leaves the guesswork out of my decision making.

By now, you should already know the power of earnings revisions and the Zacks Rank. Now I'll show you exactly which top-ranked stocks to buy for the most money making potential.

What You Can Do Today

You are invited to see 9 selected momentum powerhouses, plus a 10th to be added Monday morning, by looking inside my Zacks Momentum Trader portfolio service.

Each of these strong, hand-picked and constantly monitored companies has already shown momentum. But our signals are now showing that the real fun is about to begin.

In fact, you can arrange to receive my momentum recommendations and commentary - plus all of Zacks' other private buys and sells - for one month at a total cost of only $1. (That's almost like robbing a bank.)

I look for explosive profit bursts in as little as a month, and in that spirit you're also invited to download a just-released Bonus Report. Zacks experts mark a handful of Strong Buys for immediate breakout.

Don't miss your chance to look into our trades. This unique opportunity ends midnight Sunday, June 11.

See Our Live Momentum Buys and More >>

Good Investing,


David Bartosiak is Zacks' resident technical and momentum expert. He selects stocks and delivers daily commentary for Zacks Momentum Trader.