For Immediate Release
Chicago, IL – May 12, 2020 - Stocks in this week’s article are Acacia Communications, Inc. (ACIA - Free Report) , Virtu Financial, Inc. (VIRT - Free Report) and Luminex Corp. (LMNX - Free Report) .
3 Momentum Anomaly Stocks Amid Market Volatility
The coronavirus-triggered economic downturn has significantly affected the U.S. labor market, slashing a record 20.5 million workers from nonfarm payrolls in April and dragging the unemployment rate down to 14.7%. Employment tumbled sharply in all major sectors, with particularly heavy job losses in leisure and hospitality. However, Wall Street shrugged off the dismal news about layoffs.
The Dow gained 1.9% closing at 24,331.32 on Friday. Meanwhile, the S&P added almost 1.7% to 2,929.80 and the tech-heavy Nasdaq moved up 1.6% to 9,121.32. With the earnings season winding down and several states reopening their economy, market participants will be monitoring key economic data. While the Fed has used its range of tools to support businesses, it is clear that the economic impacts are far more than anticipated and will be felt long after employees return to work.
With this in mind, reacting hastily to volatile trends can cause more damage to a portfolio’s return than a downturn. When value or growth investing fails to fetch sustained profits, one should explore another time-tested winning strategy that simply bets on the frontrunner stocks. This is known as momentum investing.
At the core, momentum investing is buying high, selling higher. It is based on the idea that once a stock establishes a trend, it is likely to continue in that direction. There’s a whole list of behavioral biases that most investors exhibit. For instance, some investors are anxious about booking losses and hence hold on to losing stocks for too long, hoping for a rebound in prices.
Meanwhile, a few investors sell their winners way too early. Momentum investing is one of the best strategies to avoid making such mistakes. So, it’s a way to profit from the general human tendency to extrapolate current trends into the future. Momentum investing is, thus, based on that gap in time, which exists before the mean reversion occurs i.e. before prices become rational again.
Here, we have created a strategy that will help investors get in on these fast movers when there is a short-term pullback in price, and rake in handsome gains.
For the rest of this Screen of the Week article please visit Zacks.com at:https://www.zacks.com/stock/news/919279/3-momentum-anomaly-stocks-to-consider-amid-market-volatility
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