Top20 Momentum stocks - Screener (2024)

FAQs

When should I sell momentum stocks? ›

Momentum investing is a trading strategy in which investors buy securities that are rising and sell them when they look to have peaked. The goal is to work with volatility by finding buying opportunities in short-term uptrends and then sell when the securities start to lose momentum.

Often regarded as the best momentum indicator, MACD is a trend-following indicator. It represents the relationship between 2 moving averages of a financial instrument's price.

Momentum measures the rate of the rise or fall of stock prices. Common momentum indicators include the relative strength index (RSI) and moving average convergence divergence (MACD).

The idea here is to identify a sector that exhibits strong momentum; this can be done by checking momentum in sector-specific indices. Once the sector is identified, look for the stocks that display maximum strength in terms of momentum. Momentum can also be applied on a portfolio basis.

Momentum is measured by continually taking price differences for a fixed time period. To create a 10 day period momentum line you would subtract the closing price from 10 days ago from the last closing price. This result is then plotted around a zero line.

Momentum trading strategies capitalize on the continuation of existing market trends by buying securities in an uptrend and selling them as they peak, embodying the 'buy high, sell higher' philosophy and often relying on technical indicators over fundamental analysis.

Absolute Momentum: This type of momentum compares the stock to itself. For example, if over the last nine months, the performance is positive, this would indicate that the investor should stay invested in the stock. If the performance turns negative, it would warrant the investor to consider selling the security.

Momentum Indicator Best Settings

The most used settings for the momentum indicator are 7, 14, or 21. Momentum settings with values below 10 make the indicator oversensitive. This will result in more market noise. Lower settings on the momentum indicator should be carefully traded, as it can lead to many false signals.

Richard Driehaus (1942-2021) is sometimes considered the father of momentum investing but the strategy can be traced back before Donchian.

The academic research response is to focus on so-called, “12_2 momentum,” which measures the total return to a stock over the past twelve months, but ignores the previous month.

What is a momentum trap? ›

Momentum Trap stocks are those with low durability scores, expensive valuation, but high momentum. These stocks are risky bets that investors may be drawn to due to changes in share price. They however do not necessarily justify existing valuations and share price gains. Click to see classifications.

Momentum investing helps only when you are aware of the various market nuances. Momentum investing, a widely adopted investment approach, seeks to generate profits by capitalising on upward trends while steering clear of assets on a downward trajectory.