Stock Market Momentum & Daily Stock Activity

Momentum investing refers to buying and selling stocks that have the potential to yield brilliant returns due to a likely substantial jump in their prices in a short span of time. In other words, it is about buying stocks that are about to soar and selling them at a much higher price. Another point to note is that we consider the stock screener as a tool for long-term analysis. Hence, we only update technical indicators like RSI at the end of the day on the basis of adjusted close price rather than using the current price during market hours.

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Day trading works well with momentum strategies, but it forces players to take larger positions to compensate for not having the greater profit potential of multiday holds. Conversely, it is best to cut your position size when holding for multiple sessions to allow for greater movement and stop placement further away from the present action. Citigroup on Wednesday said its data analysis suggests the recent growth and rally in the cruise space “has real legs” into 2025 and beyond.

The Free Momentum Trading Strategies PDF

Here are some frequently asked questions about the momentum trading strategies. It’s crucial to confirm the divergence pattern and not rely solely on the RSI. This strategy often works best in a trending market where the RSI divergence can signal a potential continuation of the current trend​​. Note that this article does not constitute financial or investment advice. Always conduct your own due diligence before trading, considering your attitude to risk, experience in the market, and portfolio margin.

Momentum stocks can be a good investment

Carnival stock broke out as cruise lines rallied on strong momentum, with most set to report Q3 earnings this month. Although he wasn’t the first to use the strategy, fund manager and businessman Richard Driehaus is often credited as being the father of momentum investing. Investors can count on the Zacks Rank’s success, with #1 (Strong Buy) stocks producing an unmatched +25.41% average annual return since 1988, more than double the S&P 500’s performance. But the model rates a large number of stocks, and there are over 200 companies with a Strong Buy rank, plus another 600 with a #2 (Buy) rank, on any given day. Traders can search for stocks with bullish momentum by specifying that a scanner looks for stocks with a MACD histogram value greater than zero or where the MACD line is above the signal line. Conversely, bearish momentum is reflected by the MACD line crossing to below the signal line and/or by a negative histogram number (below zero).

What is the squeeze momentum indicator?

• Plus, bull markets can be a great opportunity to take advantage of strong momentum in excellent, well-run businesses.
• Suppose you invest for six months, and you have $10,000 to invest in each stock.
• The KST is a composite indicator that combines four different time frames to provide a clearer picture of price momentum and identify buy and sell signals.
• That could stretch closer to 30% if the cruise operator can sustain its 2.5% yield/cost spread.
• Momentum trading is more reactive to recent price movements, while trend following emphasizes broader, more sustained directions in the market.
• However, the system generally seeks stocks with both earnings and sales momentum and tends to point to stocks with price momentum, as well.
• The most popular fall into three categories, as explained in the following momentum indicators list.
• It involves holding overnight positions, so closing prices and next-day opening prices impact.

Momentum is the rate of acceleration of a security’s price—that is, the speed at which the price is changing. Market momentum refers to the aggregate rate of acceleration for the broader market as a whole. The tax implications and the potential for commissions and other fees mean that buying high and selling higher does not come without its fair share of challenges.

What is the 5-minute momentum trading strategy?

This is a signal of potential continued momentum in the trend’s direction. Momentum traders usually have strong trading instincts to feel where the market is heading and ride the trend. In technical analysis, momentum indicators help traders identify the strength and direction of a stock’s price. This article explains what momentum trading is and how momentum traders utilize stock scanners to implement trading strategies.

ICT Silver Bullet Trading Strategy: What Is It and How to Use It?

• Negative market momentum can be caused by news about an industry, new government regulations, or changes in leadership at the company.
• The idea is to catch the “pullback” in a trend before it resumes its main direction.
• They can also be subject to false signals, especially in choppy or volatile markets.
• The market context includes overall market trends, news, and economic data.
• “Likewise, 2026 is off to an unprecedented start achieving record booking volumes in the last three months.”
• Each indicator has different uses, and some can be used together to strengthen and complement the trader’s research.

The stop-loss is placed just below the recent price swing, and the profit target is set at a key level that offers at least twice the risk. The MACD uses the difference between the slower and faster EMAs to determine the market speed. Momentum indicators are meant to help traders spot whether the market trend will continue or reverse. Beyond that challenge of identifying stocks with a difficult-to-define “it” factor, it is also important to understand that momentum cuts both ways.

Potential for High Profits Over a Short Period

• For example, the RSI is calculated by dividing the average gain of the stock by the average loss over a specific period and then converting the result into a value between 0 and 100.
• However, this is debatable, and many can argue the opposite – that with the right mindset, tools, and mentorship – becoming a good momentum trader is indeed possible.
• Investors and technical traders can follow several indicators to gauge market momentum.
• That’s why it’s essential to know different indicators and how to use them in different trading strategies.
• A low float momentum scanner identifies stocks with low float and combines this filtered universe of stock with unfolding momentum.
• We can then patiently wait for a bullish hidden divergence before entering a BUY trade.
• It is calculated as the difference between the MACD indicator and the signal line.

By combining four timeframes, the KST effectively highlights the market’s prevailing directional bias. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns. The surge in AI investment has trickled down to businesses in all industries and of all sizes, and Nvidia is a clear beneficiary. The percentage of stocks in $BCMM above their individual Moving Average per period. Momentum is analogous to a train whereby the train slowly accelerates when it starts moving, but during the ride, the train stops accelerating.

• As an individual investor,  momentum trading will most likely lead to overall portfolio losses.
• In equities, broad market increases in corporate profits can help to create positive price momentum.
• By analyzing price and volume data, you can gain insight into a stock’s price movement’s strength or weakness.
• If you’re looking at stocks with a #3 (Hold) rank, it’s important they have Scores of A or B as well to ensure as much upside potential as possible.
• Momentum trading is a strategy that seeks to capitalize on momentum to enter a trend as it is picking up steam.
• When you purchase a rising stock or sell a falling one, you’re likely reacting to older news than the professionals at the head of the momentum investing funds.
• That’s true regardless of the facts of the news cycle or hard numbers around earnings or sales.
• Tesla held its initial public offering (IPO) back in 2010 at $17 a share.

Understanding Momentum Indicators

“With nearly half of 2025 booked and less inventory remaining for sale than the prior year, we are leveraging strong demand to achieve record ticket pricing,” Weinstein said in the release. “Likewise, 2026 is off to an unprecedented start achieving record booking volumes in the last three months.” The firm also expects Royal Caribbean to announce a long-term plan within the next two quarters, likely in conjunction with its Q3 or Q4 report.

What Causes Changes in Market Momentum?

Some companies are trading at low levels for good reason and are likely to see further declines. In a similar respect, some high-flying momentum stocks are pricey for good reason and are likely to be in store for continued and sustained gains. A high momentum leader is in a hot sector and is trading higher on volume. Ultimately it’s a stock that consistently outperforms broader indexes such as the S&P 500, Nasdaq, and Dow-Jones. Other momentum indicators useful for reversal trading include the Stochastic Oscillator, ADX, the Williams %R, and the Commodity Channel Index (CCI).

Overbought and Oversold Conditions

All three cruise line industry leaders — Royal Caribbean, Carnival and Norwegian Cruise Line — are based in Miami, which is on Florida’s east coast and well south of Milton’s projected track. The cruise line’s revenue growth has slowed over the last seven quarters after rebounding following the coronavirus pandemic. Revenue increased 15% to a record $7.89 billion, topping views for $7.82 billion. “While this would be a bold target at first blush, we do not believe that the building blocks are overly optimistic,” Citi wrote.

Finding Momentum Stocks by Using a Stock Scanner

Momentum trading is an investment strategy that looks for short-term uptrends in securities. Traders buy when prices are rising and sell them when they begin to lose momentum but haven’t yet returned to their original level. Momentum is used by investors to trade stocks in an uptrend by going long (or buying shares) and going short (or selling shares) in a downtrend. In other words, a stock can be exhibit bullish momentum, meaning the price is rising, or bearish momentum where the price is steadily falling. Momentum investing seeks to take advantage of market volatility by taking short-term positions in stocks going up and selling them as soon as they show signs of going down. In this case, the market volatility is like waves in the ocean, and a momentum investor is sailing up the crest of one, only to jump to the next wave before the first wave crashes down again.

Understanding Momentum

Higher moving average trendlines signal positive momentum while descending moving average trendlines signal negative momentum. To add to that, moving average convergence divergence (MACD) is calculated using an exponential Stock Momentum moving average. In technical analysis, momentum can be a very profitable indicator to follow for trading signals on individual securities. Below are some of the popular momentum indicators technical analysts follow.

The same risk-return trade-off that exists with other investing strategies also plays a hand in momentum investing. Momentum investing can turn into large profits for the trader who has the right personality, can handle the risks involved, and can dedicate themselves to sticking to the strategy. Tighten up stops or consider a blind exit when technical barriers are hit like a major trendline or previous high/low. Exit or take partial profits when crossovers signal potential trend changes. The firm upgraded Norwegian Cruise Line to buy from neutral and raised its price target to 30, up from 20, citing its recent strategy shift.

More news from Zacks

You need to wait until buying volume comes in to ride the wave before the price fades. Successful day traders pay close attention to high volume, which is one way to find momentum targets for day trading. Using a stock momentum scanner that allows you to customize parameters such as finding stocks hitting new highs can also help. RS tells you how your stock is trading relative to the S&P 500 and should not be confused with RSI, which stands for Relative Strength Index. RSI is another good indicator of price momentum, as it’s used to determine whether a stock is overbought or oversold. An RSI rating of 70 or higher indicates the stock is overbought, while 30 and below means it’s oversold.

By using this technique, you should know that you are trading on the backs of other people in the market, and price trends are never guaranteed. And always be prepared for unexpected reversals or corrections that take place. This can happen because of unexpected news or changes in investor sentiment in the market. Market momentum can be used as a measure of overall market sentiment that can support buying and selling with and against market trends.

Carnival Cruise Earnings

The most popular fall into three categories, as explained in the following momentum indicators list. Momentum has a natural time element to it, so you have to think beyond today’s closing price and identify long-term momentum trends by investigating price and volume patterns in charts. Some of the best indicators that professionals use are free and available on almost every platform available.

Norwegian Cruise shares rallied nearly 11% Wednesday, now significantly extended from a 20.65 buy point for a double-bottom base. NCLH has been mired in consolidation for 15 months, but the stock jumped 15% this year. One analysts revised their earnings estimate upwards in the last 60 days for fiscal 2024. The direction of a stock’s earnings estimate revisions should always be a key factor when choosing which stocks to buy, since the Scores were created to work together with the Zacks Rank. With more than 800 top-rated stocks to choose from, it can certainly feel overwhelming to pick the ones that are right for you and your investing journey.