Better Trades Momentum Part 2
Below is a MRR and PLR article in category Finance -> subcategory Investing.
Better Trades Momentum Part 2
Title:
Better Trades Momentum Part 2
Summary:
In Part I, we explored trading momentum following an earnings announcement. Here, we'll delve into chart patterns to trade momentum independently of earnings or news.
Article Body:
In Part I, we discussed how to trade momentum following an earnings announcement. In this segment, we'll explore chart patterns you can use to trade momentum unrelated to earnings or news. In Part III, we'll combine news and chart patterns for momentum trading. But first, let’s recap what momentum is and why it's a key part of my trading strategy.
I love trading options on stocks with significant momentum. This means focusing on stocks, ETFs, or indexes that are moving quickly and with purpose. If I’m investing, I want my money to work hard. During my free "Monster Momentum" webshops, I've introduced some technical tools for this strategy. Today, I’ll show you additional elements to boost your trading account.
The first step in trading momentum is finding a stock capable of moving quickly and significantly. These stocks often have an average daily range of one to two dollars. Once momentum picks up, they can trend 20 to 30 points in a few months. Sometimes momentum is sparked by news, like earnings or a new drug approval, or it’s simply due to heavy institutional trading. Learning to read technicals will enable you to spot building momentum in time to profit from significant moves.
Many of my most successful momentum trades were not news-driven. The charts simply showed strong buying or selling pressure. I look for breakouts, long candle bodies, and various patterns, combined with six key indicators, to signal a momentum trade. The best way to learn this is through real examples recently traded by myself and others in my Traders Talks sessions.
Once a stock has made a significant momentum move, it has the potential to do it again. It may take a breather or shift direction, but momentum tends to pick up again.
Take Goldman Sachs (GS), for instance. This stock rose with momentum from $155 to about $205 before stabilizing. If you attended my "Technically Speaking" classes or Traders Talks, you would’ve traded GS during that rise. After the run, GS traded sideways between $198 and $203 for nearly a month. During that time, I invested in other stocks and ETFs with more momentum. Remember, stocks with past momentum will likely regain it. Be ready to trade when they move again.
I find momentum trades using my Momentum Scans (learn more in the Ultimate Scans free webshop), and on January 8th, GS appeared on my scan as it moved toward resistance. When it rallied through the $203 level, I entered a bullish trade. There's nothing more thrilling than a momentum trade. When the technicals align and my entry point hits, it’s simply a matter of watching the stock climb. At the time of writing, GS reached nearly $214, a gain of over $11 in just five days!
Intercontinental Exchange (ICE) is another example. We traded it as it soared from $68 to $113 over nearly three months before slowing. ICE stalled at the $110 resistance, crucial for the stock. If buyer interest returned, driving the price above $110, it marked a momentum entry. Indeed, ICE broke out on January 3rd, leading to a bullish entry and a rally to $137, yielding a 27-point gain in seven days.
GS and ICE are just two of many momentum trades available. Key elements for success include ensuring the stock can move at least a dollar or two daily and checking if it has shown past momentum. Wait for breakouts from consolidation areas for a safe, profitable entry. Even if you missed these trades, more opportunities are on the horizon. Learn to read momentum signals using my six indicators, and you'll be ready for the next big move.
Hope to see you soon!
Markay Latimer with Better Trades
You can find the original non-AI version of this article here: Better Trades Momentum Part 2.
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