Screen Potential Candidate EP V

Momentum Stocks

Trading on a short-term basis has provided both boom and bust outcomes for many. The theory of investing in stocks based on technical factors such as volume traded, comparative price changes, and recent price changes was, and is, the home for day traders.

Yet, with that said, it has to be understood that there are those who want hot stocks and lots of trading action for a portion of their portfolio. Still, whether or not you believe that this is a good investment strategy is another story altogether.

Screening can be used to find information about the underlying technicals of a stock. A wonderful search that can be found directly on the MSN Money website looks for stocks whose prices have moved rapidly higher during the past six months. The screen also has requirement of at least a $100 million market cap and an average daily volume of at least 10,000, to help exclude very small companies.

The primary result will be stocks with terrific performance over the past few weeks. It also searches for companies with increasing trading volume. Theoretically, the increased volume
will lead us toward stocks that are finding more interest with investors.

Criteria We Used:

1. Market Cap more than 1 Billion.
2. On Balance Volume between 80 and 300.
3. Average Daily Volume Last 2 Weeks more than Average Daily Volume Last Month.
4. Average Daily Volume Last Month more than Average Daily Volume Last Quarter.
5. Average Daily Volume Last Quarter more than Average Daily Volume Last Year.
6. Average Daily Volume Last Month more than 10,000.
7. 6-Month Relative Strength more than 90.
8. 12-Month Relative Strength more than 90.
9. 3-Month Relative Strength more than 6-Month Relative Strength.
10. Percent Price Change 1 Week more than 5%.

As you look at the screening criteria for this search, notice how the progression starts from the most recent time period and extends forward. The next time period of volume is compared
to the previous to ensure gains during the more recent period. Momentum is the goal here.

With that in mind, it is time to move on to the next topic in order to help bring some of this together. It is wise to remember that none of the disciplines that are presented represent a
black-box answer to investment analysis. Only when combined with the appropriate investment research and analysis should a decision be reached to buy or sell a stock.

Use each of the disciplines as building blocks to gain insight into the future direction for your investments. Then develop a thorough understanding of the company, and the answers to the many questions you seek will become clear.