Scanning For Extreme Momentum Burst Pull Backs
Short term momentum extremes over a month period tend to mean revert. A recent example of this is CUBA which went parabolic with gains in excess of 100% over a 4 day period. Another example from last September/October is LAKE which gained nearly 400% over month.
One approach to these types of extreme moves is to devise tactics for shorting, particularly if there is a high degree of emotional based speculation, which in the first example was the thawing relationship between the US and Cuba, and in the second example, Ebola. Even though CUBA has very little, if anything at all to do with the country Cuba, it has a cute ticker and sometimes that’s enough.
Personally, what I will begin to focus my attention on this year is curating an anticipation watch list of stocks that have exhibited moves of 25%+ over a month period and have had constructive consolidation thereafter without imploding. The fundamental premise behind this is to isolate stocks that have shown themselves capable of moving quickly through an up swing followed by range contraction while exhibiting characteristics of linearity. What I’m scanning for is the following:
Price > $3
Price %Change from 40 to 20 days ago > 25%
Sort by Average Close 2/Average Close 20
Visually identify linearity, use BB width squeeze for contraction, focus on Nr7 or 1% days
Focus on minimal Price %Change over the previous 5 to 10 sessions
One of the better looking candidates I’ve identified for this week is OVAS
Another biotech that looks like an interesting candidate is TTPH
A stock that moves 200% over a year must first move 100%. By prioritizing my anticipation list and stalking momentum candidates that have proven themselves capable of moving between 25 to 50 percent I’m looking to increase my odds of taking a sliver of the burst between 100% to 150%.
Source:
Scanning For Extreme Momentum Burst Pull Backs
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