You've heard the stories of the former janitor at a start-up becoming a multi-millionaire years later after the IPO. You've seen stocks like Apple (AAPL), Google (GOOG) and Tesla (TSLA) during their meteoric ascents. If there was only some way to uncover these stocks as they burst onto the investment scene. Some way to find the next Apple...
Momentum stocks are, in my opinion, the way to find the next Apple. They're the "sexy" stories that your stock-crazy friends love to talk about. They are the stocks that you talk about years after you've made your trade.
Being a momentum stock is a temporary situation and a necessary stage in the lifeline of some of the world's largest companies at one point in time. In the last couple of years, we've been introduced to new power players through momentum stocks like Shake Shack (SHAK) and GoPro (GPRO).
A Trade Possessed
A true momentum stock is a trade possessed. They ignore market conditions, bad news, economic reports and outlandish valuations. They rocket higher day after day, continuing to create new 52-week and all-time highs. These are the trades where you can cash in 50%, 100% or more.
More . . .
Some momentum stocks don't make it all the way through this maturation phase. Sometimes the hottest stocks in the world fizzle out and fall by the wayside. But for those few fleeting months they are the talk of the town.
Stocks at Highs Tend to Go Higher!
Talking about momentum in the world of stocks is a lot like talking about momentum in the world of physics. I bet you didn't think the same basic Newtonian laws that governed the physical world would hold any relevance in the fast-paced, high-stakes game of Wall Street. But they certainly do. You see, a body in motion tends to stay in motion and a body at rest tends to stay at rest. This law of inertia also applies to stocks. Stocks on the move tend to stay on the move and stocks going nowhere tend to stay nowhere.
The reason why that happens with stocks is totally different from the reason it happens in physics. Stocks move in price as buyers and sellers agree on changing prices. When you see a stock rising, it's because the buyers are willing to pay a higher and higher price for it. It's these new buyers entering the market that help give the stock momentum a positive direction.
Finding the Next Apple
I start 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 15% of their 52 week highs
• Have had earnings revisions to the upside in the last month
• Have outperformed the market
• Are within 15% of their 52 week highs
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.
Trend, Trace and Trigger
From this list I then drill down into the three key areas of my brand of technical analysis. These three areas are trend, trace and trigger. I use simple moving averages in order to uncover the short-term trend direction and strength for a stock. Then I trace areas of potential support and resistance in order to identify the areas on the chart where the stock may encounter buyers and sellers. Lastly, I use an overbought/oversold indicator like the fast stochastics or the commodity channel index in order to tell me the exact moment to buy.
Actually, There's an Easier Way
Of course, all this takes quite a bit of time and work, but it doesn't have to be that way for you.
Until this coming Saturday, we are re-opening access for new investors to a portfolio service I'm directing, the Zacks Momentum Trader.
Right now, 7 stocks are targeted by our highly selective radar and we are about to pull the trigger on an 8th. All of these powerful companies have shown momentum, but now our signals are flashing with exceptional intensity.
Today I am offering you the chance to get in on them as they really catch fire.
Please be aware, however, that this is one of our most exclusive "closed portfolios." Access for new investors has been re-opened only temporarily. It will close again Saturday, June 6, because too much early action on the momentum stocks would make it harder for our members to fully profit. So I suggest you look into this portfolio right away.
Good Investing,
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