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Momentum’s not always easy to achieve, but once it’s in place, things tend to roll on. These stocks are moving in the right direction.
Well, there is one strategy that has persisted, and been followed and widely discussed for decades – it’s called “momentum trading”.
Momentum trading involves betting that the stock market’s recent winners will remain winners in the near term.
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The strategy uses the strength of stock price movements as a foundation to open positions, seeking to use momentum to enter a trend as it picks up steam.
One of the main benefits of momentum trading is that it can generate high returns in a short period of time, especially in volatile markets.
Obviously there’s a bit of risk involved in momentum trading because in essence, you’re making a decision to buy a stock based on recent buying activities of other traders.
So to be a successful momentum trader, one needs to be able to identify the best stocks quickly and accurately.
The goal for momentum traders is basically to enter into trades at key points in the trend in order to maximise profits.
There are several indicators to quantify momentum, and here we look at three main signals used by the market:
- 52-week high
- Simple moving average
- Relative strength index
52-week highs
Traders often view the 52-week highs as entry signals.
This is due what’s called the “52-week high effect” – where if a price has broken out above its 52-week range, there must be some factor that generated enough momentum to further continue the price movement in the same direction.
On the other hand, if a stock is far away from its 52-week high, chartists believe the momentum will continue going that way.
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PYC THERAPEUTICS (ASX:PYC)
RNA-therapies focused biotech, PYC Therapeutics, said its fourth drug candidate had disease-modifying potential in patients with end-stage renal failure due to PKD (polycystic kidney disease).
A study conducted by PYC in human 3-dimensional models showed that its investigational drug candidate, PYC-003, could address PKD at the root cause.
Results showed a deduction in cyst size and frequency following treatment with PYC-003 in a human 3D model, which was generated using tissue collected directly from the kidneys of PKD patients.
VERTEX MINERALS (ASX:VTX)
Recent lithium discoveries in the Lake Johnston area, together with an internal review, have prompted Vertex to undertake a soils program across its wholly owned Lake Johnston, Taylor Rock tenement E63/2058.
Vertex has lodged an exploration licence application over additional tenure in the Lake Johnston area – now designated E63/2400.
Taylor Rock sits northeast of Charger Metals Medcalf Spodumene Deposit and TG Metals Burmeister and Jaegermeister Li Prospects.
Vertex is also expecting to receive its Reward Gold Mine (Hill End) pre-feasibility study in December.
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Simple moving averages
SMA often is used to determine whether a stock price will continue in the same direction, or if it will reverse a bull or bear trend.
As a general rule, if the current stock price is above the SMA, the price trend is up. If the price is below the SMA, the trend is down.
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Data from CommSec
ASTUTE METALS (ASX:ASE)
Astute recently advised that a recent rockchip sampling campaign has revealed outstanding rock chip assay results of up to 2190ppm lithium from sampled claystone at the recently staked wholly owned Red Mountain Lithium Project in Nevada.
A total of 36 samples were taken at Red Mountain, targeting claystone and other outcropping to subcropping rock types to characterise the Project’s potential for lithium mineralisation.
Additionally, Astute also said follow-up drilling has intersected more intervals of prospective claystone host rock at its wholly owned Altair lithium project in Nevada, USA.
Hole AL03 intersected 22.9m (75ft) of claystone and gravelly clay from 153.9m (505ft) to the end-of-hole. Hole AL02 intersected a combined 45.7m (150ft) of claystone and gravelly clays over nine zones with interbedded gravels.
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GREENSTONE RESOURCES (ASX:GSR)
Greenstone has a strategic review currently under way to assess near-term mining opportunities at Burbanks & Phillips Find.
An existing small mining permit at Burbanks North may provide an opportunity to expedite production.
Initial pit optimisations at Burbanks North shows potential for a starter pit within the permitted area, while early discussions are currently underway in respect of mining and milling partnerships.
Meanwhile, Phillips Find hosts a resource of 732,960 tonnes at 2.30g/t for 54,567 ounces, which are located either adjacent to, or below the historical open pits of Baccus Gift, Newhaven and Newminster, the latter of which was last mined profitably in 2015 at a materially lower gold price of around $1500/ounce.
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Low RSI (oversold)
The relative strength index is a measure of the strength of a stock’s momentum, either in the upward or the downward direction, and is used to indicate whether a stock is oversold or undersold.
Generally speaking, an RSI above 70 means a stock is overbought; and an RSI below 30 indicates that it’s been oversold.
An RSI above 80 meanwhile is strongly overbought, and an RSI below 20 is strongly oversold.
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Data from CommSec
REACH RESOURCES (ASX:RR1)
Reach has been sold off since announcing assay results from the company’s maiden drill program at its wholly owned Morrissey Hill Lithium project in the Gascoyne Mineral Field WA.
The Phase 1 drill program comprised 15 RC holes for a total of about 2600m.
The drilling was designed to test the depth extent and subsurface continuity of surface lithium mineralisation identified from earlier soil and rock chip sampling.
Rock chips in the targeted area returned values of up to 2.3 per cent Li2O, 4295ppm Cs and 706ppm Ta.
AUSWIDE BANK (ASX:ABA)
Auswide recently announced the appointment of current non-executive director Greg Kenny as interim managing director and CEO of Auswide Bank, effective December 11, 2023.
Kenny was appointed to the Auswide Bank board of directors in November 2013.
He has had an extensive career with Westpac Banking Corporation and St George Bank, where he held the positions of managing director (NSW and ACT), general manager corporate and business bank and general manager group treasury and capital markets.
Prior to that, Kenny held positions with Bank of New York and Bank of America in Australia.
This content first appeared on stockhead.com.au
Stockhead has not provided, endorsed or otherwise assumed responsibility for any perceived financial product advice contained in this article.
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