Tag: investors

How To Spot Momentum Stocks

TL;DR

  1. Avoid stocks below $5
  2. Make sure the company’s EPS has grown at least 14-15% over the last few years
  3. Determine if the Return on Equity (ROE) has been more than 17%

The 3 minute read

A lot of you (our readers) asked us what the best ways to determine if a stock was a “momentum stock” are, so here’s a quick attempt at making it slightly easier for you.

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Understanding Trend Trading

Successful traders likely have been familiar with the importance of trends in trading since a group of merchants gathered under a buttonwood tree in New York to trade stocks. Trend trading not only represents the potential for a big move and profit, but also the path of least resistance for price as an established trend is likely to continue.

Newton’s First Law of Physics states, “An object in motion tends to stay in motion with the same speed and in the same direction unless acted upon by an unbalanced force.” This is the compelling basis for trading trends as they are likely to continue unless acted upon by an outside force (such as disappointing earnings, a market panic, geopolitical events, etc.), and it’s the reason why some trends stay in place for years.

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Types of Stock Market Analysis

There is no shortage of analysis for anyone interested in investing. A search for the term “stock market analysis” turned up 122 million hits on Google and well over 15 million hits each on Bing, and Yahoo. The majority of stock market analysis can be lumped into three broad groups: fundamental, technical, and sentimental. Here’s a close look at each.

Fundamental Analysis

The goal of fundamental analysis is to determine whether a company’s future value is accurately reflected in its current stock price. Fundamental analysis attempts to estimate the value of a particular stock based on a variety of factors, such as the current finances of the company and the prevailing economic environment. Fundamental analysis also may include speaking with a company’s management team and assessing how the company’s products are received in the marketplace.

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Dear Investment Manager, Are You Keeping-up With The Times?

But you know that already. No? Ok. Well, it started happening about 3 years ago when social media and other instant gratification tools, technologies and philosophies started having a noticeable impact on people’s attitude towards money. Spending, saving, planning and investing in that order. Over the last year-and-a-half, the millennials have begun to come-off age, from your perspective. From being the target of consumer brands selling food, fashion and lifestyle they are being actively pursued by money management brands, read apps and sites.

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