Strong Stocks with Price Momentum and How to Screen For Them
With the S&P 500 in limbo, pending a breakout higher or lower which will likely set the stage for the market direction over the next few months, there are still many stocks performing very well. In this article, I will go through several of them, as well as a screen/scan that can be used to find strong performing high price momentum stocks.
Below are stocks at the top of the screener list. These stocks have performed well recently. Keep in mind that the S&P 500 dropped in late July and has been chopping sideways between early August and now (Sept. 4, 2019), so these stocks are in most cases significantly outperforming the broader market.
The list has 36 stocks on it, here are the top 20 listed by percentage increase over the last year.
This is the raw data based on the screener used (discussed shortly). We then need to go through and manually decide which stocks to trade, if any, from the list. Which stocks you trade will depend on what setups, chart patterns, and strategies you like to trade.
I like it when a stock is in an uptrend, then consolidates, and then breaks out higher. If SSRM, PAGS, GOLD, SMPL, APPN, TERP, PFGC, and VRRM (U.S. stocks) could break out of their consolidations to the upside I would be interested in buying. I write these stocks down and then do some more digging to make sure they don’t have earnings coming up in the next few days. I prefer to place trades after earnings if the setup is still there as opposed to buying before earnings. I will also check the reward:risk of the trade. My expected profit should be at least 1.5x my risk, and ideally 2x or more.
These are short-term charts. I will also look at the price action over the last two to three years of any stock I seen on the screener that I am interested in swing trading. So these little charts are just the beginning. I pull a bigger chart of any stock I am interested in and take a closer look. I may also pull up their financials…stocks with improving financial statements (EPS and sales, for example) tend to be stronger performers.
I also typically avoid trading biotech and pharmaceutical stocks. I sometimes will make trades in them but I will reduce my position size just in case negative news comes out. Stocks in those sectors are prone to large price gaps.
NTES and PODD recently broke out of a consolidation to the upside, as can be seen on the short-term chart.
How to Screen For High Momentum Stocks
Now, let’s look at a way to screen for high momentum stocks. A screener is just a piece of software that can be used to find and filter stocks based on specified criteria. I often use Finviz, StockRover, and StockFetcher for screening. The stocks above were produced with Finviz.
There are infinite ways to scan for stocks. You can add in additional criteria, take criteria out, or alter the criteria parameters. Here are the criteria and parameters used to produce the list of stocks above.
Let’s look at what these criteria mean.
Price above SMA200 means only show stocks that are trading above their 200-day average price. This is a simple filter for finding stocks in longer-term uptrends.
0-10% below High means only show stocks that are at or within 10% of a new 52-week high price. This show the stock has been strong recently as it has moved to near a yearly high.
Over 500k Average Volume mean only show stocks that trade at least 500,000 shares per day. We want to be able to get in and out when we want. If the volume is too low that can be difficult.
Over 10% EPS grow qtr over qtr means only show stocks where earnings have increased from one quarter to the next by more than 10%. This is an optional criteria.
Over 10% sales growth qtr over qtr means only show stocks where sales have increased from one quarter to the next by more than 10%. This is an optional criteria.
Overbought (60) on the RSI (14) means only show stocks where the Relative Strength Index is above 60, showing the stock is in the upper portion of its recent price range. This is another indicator of recent price momentum.
Finviz has lots of other criteria you can use to help filter down the results, or you could remove some of the criteria to get more results.
The goal is not to trade every stock on the list…FAR FROM IT! Write down the ones of interest and then go through them, comparing them to each other. Only place orders in the setups you prefer the most. If there aren’t many great choices, then don’t trade. You want to save your capital for really amazing opportunities. There may be nothing on the scan this week, but next week there may be one or two amazing opportunities and you’ll want to have capital available.
For other ideas on finding and screening for high momentum stocks, see Swing Trading Filters for Finding High Momentum Stocks and How to Screen For the Strongest Stocks in the Strongest Sectors.
By Cory Mitchell, CMT