How to Spot Momentum Stocks
Momentum stocks are stocks with high returns over the past three to 12 months. Momentum investors seek out stocks with the potential to double or triple within just a few months. Momentum investors generally hold a stock for a few months and monitor their holdings daily. They tend to sell their stocks with a few months after acquiring it.
There are many stocks in the market that accelerate in price that go on to make 100% to 300% returns in less than year or even in a few months.
However, for the investors who are just starting, momentum investing can be a confusing and frustrating experience to find these stocks. Here are some keys to spot momentum stocks.
One of the things to spot momentum stocks is the relative strength of the stock compared to the overall market over a specific timeframe. Most momentum investors seek at a stock which has outperformed at least 90% of all stocks over the past 12 months. When major indices declines, a great momentum stock exhibit strength by holding or even exceeding their highs. When the major indices rally, momentum stocks typically lead the rally and make new highs outpacing the market.
Potential momentum stocks should show in their balance sheet that they are growing at an accelerated rate.
Another factor is the Earnings per Share growth. At least a 15% year-over-year earnings per share growth is needed to qualify a momentum stock. Stocks with accelerating rates of EPS growth over previous quarters are also considered.
In addition, a positive forecast by at least some analysts regarding the Company's earnings in necessary for identifying momentum stocks. Further, momentum investors also looks at whether the reported earnings exceeded the analysts forecasts compared to the last quarter.
A company can't grow its earnings faster than its Return on Equity, which is the Company's net income divided by the number of shares held by investors, without raising cash by borrowing or selling more shares. Many companies raise cash by issuing stock or borrowing, but both alternatives reduce earnings-per-share growth. For momentum investors, a potential stock should show an ROE of 17% or better.
The share price and trading volume of the stock are also factors to spot a momentum stock.
The only reason for stocks that trade at very low prices is that they are already out of favor with the market. Avoid stocks trading below US$5.
Momentum investors seek stocks that have high trading volumes, the number of shares traded daily on the average. Very low trading volumes indicate the markets lack of interest. Generally, momentum investors seek those with a minimum volume of 100,000 shares or at least see their average daily volume increases as the value of the stock rises.
Start keeping a list of potential momentum stocks and track their performance in the market. In time, you will be able to spot the stocks that go on to make 100% to 300% returns in less than year or even in a few months.
Related Tags: stock trading, trading system, hot stocks, stock picks, stock newsletter, momentum stocks
Mark Crisp Weekly Momentum Stock Trading System Superior Stock Trading Results. http://www.crispstocks.com Your Article Search Directory : Find in Articles
Recent articles in this category:
- The Secrets to Getting Low Down Payment Car Insurance
Upon purchase of a new car, there is almost always a requirement to buy an auto insurance policy as - The Wisdom Behind Auto Insurance Comparison Quotes
No one in his right mind would not go for a good deal. In fact, everyone is out on their feet and ru - The Benefits of Auto Insurance Comparisons Florida
Insurance can be expensive. This is something everyone knows about especially in the sunny state of - Auto Insurance Florida: The No-Fault Policy
There are different kinds of car insurance offered by a wide range of providers today. Different sta - Finding the Cheapest Auto Insurance Companies
Everyone is asking and searching for the cheapest auto insurance companies available today. Consider - How do You Compare Private Health Insurance Cover in Australia?
Deciding what is the best and most affordable private health insurance cover can be easy if you take - How Payment Protection Insurance Was Mis-Sold
For over six years the issue of Payment Protection Insurance (PPI) and how it was mis-sold to custom - Finding Quotes For Auto Insurance Online
One of the many concerns when you are shopping for auto insurance is being able to get access to quo - How You Can Find the Best Auto Insurance Online
When it comes to renewing your car insurance you are going to quickly discover that there are a numb - Guidelines For Searching For Auto Insurance Online
The internet can be a great source of discounts and values related to auto insurance. However, many
Most viewed articles in this category:
- Trading Forex With Pivot Points
Forex Pivot Point Trading are used today by Forex Traders and are calculated on the previous days mo - Where To Search For Free Grants
Where do you look for free grants? The search must be thorough or it could be an exercise in futilit - The Connection Between High Blood Pressure and Salt
We are a society of Salt Addicts. It cannot be denied. When you look at the things we do and the pla - Tips For Avoiding HYIP Scams
Before knowing about HYIP Scams, refer to the functioning of HYIP or "High Yield Investment Programs - Getting Credit After Bankruptcy
Consumers do not have to live sans credit following a bankruptcy. By following certain steps consume - Tips For Choosing A Credit Card
Are you looking for that perfect credit card? If so, you may be confused about what exactly to look - Cheap Car Insurance For Teens Online
Many elements determine a car insurance policy. Car insurance companies look at the person's age, hi - What Exactly Is Free Grant Money?
You can apply for free grant money from various government agencies. But where exactly does this mon - Small Business Owners Marketing and Customer Service
Marketing can be time-consuming, but it doesn't have to be hugely expensive now, thanks to the Inter - Apply Online For A Credit Card - How To Choose A Card?
The best type of credit card for you will be dependant on how you intend to use the credit card. Are