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U.S. stocks swung as U.S.-Iran deal talks stalled, oil climbed and Big Tech earnings hit sentiment.
The Fed held rates at 3.5-3.75% as it targeted persistent inflation pressures amid the turmoil.
CRDO, FN and BFH surged over 52 weeks but slid 6.7-7.6% in a week, fitting the momentum screen.
The broader U.S. equity markets witnessed intense volatility this week as stalled negotiations for a U.S.-Iran peace deal, spiraling oil prices and earnings releases of Big Tech bellwethers kept investors on the edge. After hitting a new record high on Monday, equity markets went downhill as President Trump scrapped plans to send a U.S. special envoy for peace talks in Pakistan. The continuation of the Iran blockade and restrictions in the Strait of Hormuz compounded the stock market misery, as oil prices went up steadily. On its part, the Federal Reserve kept the interest rates unchanged in a range between 3.5% and 3.75% as it aimed to tame the persistent inflationary pressures.
Investors await further cues on the broader economic policy as a slew of economic data, including the preliminary first-quarter GDP, is due to come out this week. Amid the vagaries of the market, investors often seek to employ time-tested winning strategies to fetch sustained profits. One of the most successful game plans to beat the blues is to bet on momentum stocks, like Credo Technology Group Holding Ltd (CRDO - Free Report) , Fabrinet (FN - Free Report) and Bread Financial Holdings, Inc. (BFH - Free Report) when value or growth investing fails to generate the desired profits.
This approach primarily tends to follow the adage, “the trend is your friend.” At its core, momentum investing is “buying high and selling higher.” It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. Momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. Therefore, this strategy is quite tricky to implement, as detecting these trends is not easy. Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from long-term price momentum and a short-term pullback in price.
Screening Parameters for Momentum Anomaly Stocks
Percentage Change in Price (52 Weeks) = Top #50: This selects the top 50 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get the best stocks that have appreciated steadily over the past year.
Percentage Change in Price (1 Week) = Bottom #10: From the above 50 stocks, we then choose those that are also among the 10 worst performers over a short one-week period. This parameter picks the ones that have witnessed a short-term pullback in price.
Momentum Style Score of B or Better: A top Momentum Style Score knocks out a lot of the screening process, as it takes into account several factors that include volume change and performance relative to its peers. It indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum 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 the stability of price.
Average 20-Day Volume Greater Than 100,000: A substantial trading volume ensures that these stocks are easily tradable.
Here are three of the five stocks that made it through this screen:
Based in Grand Cayman, the Cayman Islands, Credo offers high-speed connectivity solutions. At the core of Credo’s business is its Serializer/Deserializer and Digital Signal Processor technology stack. The fabless company uses foundry/assembly/test partners and operates globally with offices in North America and Asia.
The stock has soared 308.3% over the past year but lost 7.2% over the past week. Credo has a Momentum Score of B.
Based in George Town, the Cayman Islands, Fabrinet provides advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products. The company manufactures optical communication components, modules, sub-systems, industrial lasers, automotive components, medical devices, sensors and customized optics and glass used both in customer programs and the merchant market.
The stock has surged 213.8% over the past year but lost 6.7% over the past week. Fabrinet has a Momentum Score of B.
Headquartered in Columbus, OH, Bread Financial is a tech-forward financial services company, offering simple, personalized payment, lending and saving solutions. The company creates opportunities for customers and partners through digitally-enabled choices that offer ease, empowerment, financial flexibility and exceptional customer experiences.
The stock has jumped 80% in the past year but declined 7.6% in the past week. Bread Financial has a Momentum Score of B.
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Buy 3 Momentum Anomaly Stocks as Stalled Truce Deal Spurs Volatility
Key Takeaways
The broader U.S. equity markets witnessed intense volatility this week as stalled negotiations for a U.S.-Iran peace deal, spiraling oil prices and earnings releases of Big Tech bellwethers kept investors on the edge. After hitting a new record high on Monday, equity markets went downhill as President Trump scrapped plans to send a U.S. special envoy for peace talks in Pakistan. The continuation of the Iran blockade and restrictions in the Strait of Hormuz compounded the stock market misery, as oil prices went up steadily. On its part, the Federal Reserve kept the interest rates unchanged in a range between 3.5% and 3.75% as it aimed to tame the persistent inflationary pressures.
Investors await further cues on the broader economic policy as a slew of economic data, including the preliminary first-quarter GDP, is due to come out this week. Amid the vagaries of the market, investors often seek to employ time-tested winning strategies to fetch sustained profits. One of the most successful game plans to beat the blues is to bet on momentum stocks, like Credo Technology Group Holding Ltd (CRDO - Free Report) , Fabrinet (FN - Free Report) and Bread Financial Holdings, Inc. (BFH - Free Report) when value or growth investing fails to generate the desired profits.
This approach primarily tends to follow the adage, “the trend is your friend.” At its core, momentum investing is “buying high and selling higher.” It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. Momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. Therefore, this strategy is quite tricky to implement, as detecting these trends is not easy. Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from long-term price momentum and a short-term pullback in price.
Screening Parameters for Momentum Anomaly Stocks
Percentage Change in Price (52 Weeks) = Top #50: This selects the top 50 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get the best stocks that have appreciated steadily over the past year.
Percentage Change in Price (1 Week) = Bottom #10: From the above 50 stocks, we then choose those that are also among the 10 worst performers over a short one-week period. This parameter picks the ones that have witnessed a short-term pullback in price.
Zacks Rank #1: Stocks sporting a Zacks Rank #1 (Strong Buy) have a proven history of outperformance irrespective of the market conditions. You can see the complete list of today’s Zacks #1 Rank stocks here.
Momentum Style Score of B or Better: A top Momentum Style Score knocks out a lot of the screening process, as it takes into account several factors that include volume change and performance relative to its peers. It indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum 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 the stability of price.
Average 20-Day Volume Greater Than 100,000: A substantial trading volume ensures that these stocks are easily tradable.
Here are three of the five stocks that made it through this screen:
Based in Grand Cayman, the Cayman Islands, Credo offers high-speed connectivity solutions. At the core of Credo’s business is its Serializer/Deserializer and Digital Signal Processor technology stack. The fabless company uses foundry/assembly/test partners and operates globally with offices in North America and Asia.
The stock has soared 308.3% over the past year but lost 7.2% over the past week. Credo has a Momentum Score of B.
Based in George Town, the Cayman Islands, Fabrinet provides advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products. The company manufactures optical communication components, modules, sub-systems, industrial lasers, automotive components, medical devices, sensors and customized optics and glass used both in customer programs and the merchant market.
The stock has surged 213.8% over the past year but lost 6.7% over the past week. Fabrinet has a Momentum Score of B.
Headquartered in Columbus, OH, Bread Financial is a tech-forward financial services company, offering simple, personalized payment, lending and saving solutions. The company creates opportunities for customers and partners through digitally-enabled choices that offer ease, empowerment, financial flexibility and exceptional customer experiences.
The stock has jumped 80% in the past year but declined 7.6% in the past week. Bread Financial has a Momentum Score of B.