Momentum Stocks Give Traders Pay Day!
Wall Street will be officially parting ways from the spring this coming week, the market kicking off the summer with a jam-packed week of economic events. Last week, in its own right, ended mixed. The Dow Jones recorded losses of 1%, the S&P 500 shedding 0.38%. Alongside the weakness on these 2 major indexes, the NASDAQ recorded nice gains of 1.46%, its year-to-date yield now coming to 13.5%. On the flipside, the Russell 2000 ended up 0.77%, now with aggregate gains of over 10% on the year.
With the week nearing an end, this past Friday brought with it another battle in the ongoing trade war. This time around, though, little damage was accrued. The market did exceptional work, shrugging off the trade war concerns, especially those regarding China. At the same time, the technical conditions on Friday were more opportune for the market to retreat to a certain extent – and the imposition of $50 billion in tariffs on China were the perfect alibi.
It was a week chocked full of news, from the offshoots of the G7 summit, the Fed decision to hike rates by a quarter of a percentage point, the Trump-Kim meeting, and to wrap up the week’s drama, the tariff imposition. In tandem, there was plenty of good reason for the above to effect a “selling the news” response, but the indexes adamantly refused to play the game, even though they were traded at overbought levels. Day trading training can’t teach you to always foresee the market’s move – but it can teach you to keep your finger on the pulse of the trend.
Perhaps what was most impressive in the market last week was the exceptional momentum in some stocks, especially, new Chinese issues and cloud, internet and tech stocks. Traders didn’t hesitate and continued to chase these stocks the more they soared to higher and higher levels, an introduction to day trading at its best!
That was perhaps the key story in this past week’s trading. The momentum in these areas was so strong, to the point that some of the most intractable bulls stated to get cold feet about excess gains. The bearish spin on this price movement is that we’re seeing a clear signal that this is the last round of the bull market. The market’s powerful movement is narrowly limited to a but a few select sector; primarily emotional in tenor and driven by fear, traders are afraid to be left behind, greed overtaking them as they hope to rack up huge gains in but a very short amount of time.
Stocks like CLPS, IQ, HUYA, SOGO, GOOS, DBX, BILI, NFLX, PS are only some of the names which have appeared on trader screens regularly over the last few weeks; it goes without saying that traders have ignored the negative news in the overall market. Every stock market mentor, though, could have pointed that out.
What these momentum stocks share in common that they have come up time in and time out as momentum traders select their favorite market stocks. It seems that the only thing that matters to traders in these stocks is that they move at a faster clip. Fundamentals are entirely secondary now in so far as momentum stocks go, and in a similar vein, the same goes for the overall market conditions.
It could be a beautiful and very rewarding tack to trade momentum stocks, as long as you manage your positions intelligently and correctly; likewise, it’s important to remember that momentum, when push comes to shove, can change course, and move in the opposite direction. The stocks that rise the fastest are also those that fall faster than any others, a central tenet of live trading. Trading live online can be exhilarating, but when the floor comes out from beneath a stock, it’s like whiplash; the shock is inevitable, and once you’ve realized that it’s time to get out, it could already be too late. That’s why you have to follow and monitor the activity closely in our stock trading chat rooms!
Hand in hand with the stocks that soared, we saw recognizable weakness in bank, retail, and precious metal stocks, not to mention other stock groupings that pushed the S&P 500 and the Dow lower. The NASDAQ and the Russell 2000 (IWM) performed significantly better than the other leading indexes; and traders eyeing the trend continued to find more and more momentum stocks to trade. Day trading stock picks were like low-lying fruit.
In Summary: To a certain degree, what we’ve been seeing is a market with a split personality, some stocks overcome by euphoria reminiscent of the dot-com era, with other large stock groupings treading water and covering little if any distance. It’s very impressive to see how the market continued to relate to this past week’s news without beating an eyelash. If traders wanted to find an excuse for aggressive selling, it was not hard to find one. Traders, though, preferred to chase strong pockets of momentum, rather than shorting the large indexes.
Have a great trading week!