Momentum

“Momentum trade criteria: (1) Trade high-volume stocks (500,000 shares per day or more); (2) Select stocks that are up on the day (for long trades), because this indicates there is more strength on the bid than the ask.  Do the opposite for short trades; (3) Risk-averse traders should trade stocks with a spread of a dime or nickel (or less); and (4) When buying stock, the bids on the Level II screen should be ‘thick’ (i.e. multiple market makers and ECNs at a given price level.”  Lindsey Weinger

“’Follow the ax’ is an oft-repeated trading adage that suggests you follow what the major market players are doing.  In short, it means, don’t bet against the deep pockets.”  Kiara Ashanti 

“Hold your strongest stocks the longest and sell stocks that stop moving up or are acting sluggish quickly.  Remember stocks are only good when they are moving up.”  Dan Zanger

“Studies have found that mutual fund inflows are positively correlated with market returns.  Momentum plays a part in the decision to invest, and when more people invest, the market goes up, encouraging even more people to buy. Its a positive feedback loop.”  Tristan Yates

“True market momentum is at the industry-group level, not at the stock level.”  Ben Warwick  

“According to research by Bespoke Investments, the most heavily shorted stocks have led in rallies over the last five years which means when markets are rallying they can really rocket.” Matt Blackman

“Make quick profits from late day momentum! Whenever the market or a stock rallies on the close, look for a strong open the next day.  When new information about a company spreads and causes a strong increase in buying, and the buying is interrupted because the market closes, it creates even stronger demand for the stock the next morning.  This momentum is caused by buyers that didnt get filled and still have open buy orders, and by traders that play momentum stocks.  Having seen where the stock closed, momentum traders will examine the intraday chart, see that it closed up strong, and jump on it in the next trading session.  Because the 2 groups of buyers add momentum, they create the carry-over of upside momentum the next day.”  Unknown 

“Identify and follow strong groups of stocks and try to keep your selections in these groups.”  Dan Zanger

“And in a classic case of tail wags dog, when mutual fund investors withdraw their cash, mutual fund managers have to sell stock to raise money, whether they want to or not.  This forced selling can, and often does, push share prices lower, which leads to even more redemptions and therefore more selling.  This is not a pretty picture.”  Unknown

“High-powered breakouts occur with a strong surge of momentum in the direction of price change.  Such breakouts may be short-lived, however, occurring toward the latter stages of a long trend.  Sometimes, such breakouts signal the end of one trend and the beginning of another.  In either case, identifying such market action early is likely to be highly profitable.”  Tushar Chande

“The hedge funds are trading actively because theyre under so much pressure to make money each and every month.  All this trading activity and volatility creates a lot of ‘noise’ in the stock market.  And that noise can be quite distracting.  But most successful investors seem to ignore the noise, as they follow the siren song of buy low, sell high.”  Unknown

“Menzly’s basic strategy, employed by many hedge funds, is to sort stocks over a six-month period based on price movements.  It finds both the top 10 percent and the bottom (worst-performing) ten percent over six months, then buys the top ten percent and shorts-sells the bottom 10 percent.  The investor holds for a month and then repeats the process every month.  The strategy’s 60-year return is around 11 percent.  One advantage of the strategy, Menzly says, is that it can be applied successfully no matter what the general direction of the market.”  Rob Luke

“After the market has moved for a substantial period of time, your stocks will become vulnerable to a selloff, which can happen so fast and hard you wont believe it.  Learn to set new higher trend lines and learn reversal patterns to help your exit of stocks.”  Dan Zanger