{"id":109329,"date":"2017-07-20T10:37:11","date_gmt":"2017-07-20T14:37:11","guid":{"rendered":"http:\/\/countingpips.com\/?p=109329"},"modified":"2017-07-20T07:37:55","modified_gmt":"2017-07-20T11:37:55","slug":"the-avalanche-effect-using-momentum-to-your-advantage","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/07\/the-avalanche-effect-using-momentum-to-your-advantage\/","title":{"rendered":"The Avalanche Effect: Using Momentum to Your Advantage"},"content":{"rendered":"<div id=\"inves-662889322\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">July 20, 2017<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p>By <a href=\"http:\/\/WallStreetDaily.com\/\"><u>WallStreetDaily.com<\/u><\/a> <img loading=\"lazy\" decoding=\"async\" class=\"attachment-home-th size-home-th wp-post-image\" style=\"display: block; margin-bottom: 5px; clear: both;\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/07\/072017_AvalancheEffect_feature.jpg\" sizes=\"auto, (max-width: 580px) 100vw, 580px\" srcset=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/07\/072017_AvalancheEffect_feature.jpg 580w, https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/07\/072017_AvalancheEffect_feature-300x155.jpg 300w\" alt=\"\" width=\"580\" height=\"300\" \/><\/p>\n<ul>\n<li>Value investors can\u2019t wrap their minds around this.<\/li>\n<li>The new normal: Buying high\u2026 selling higher.<\/li>\n<li>How this \u201cavalanche effect\u201d can make you rich.<\/li>\n<li><a href=\"https:\/\/pro.agorafinancial.com\/m\/715728\" target=\"_blank\" rel=\"noopener\"><strong>Also recommended: What to do when your stock is \u201cmarked.\u201d<\/strong><\/a><\/li>\n<\/ul>\n<hr \/>\n<p><!--END Hero Title and bullet point--><\/p>\n<p><!--Lead--><\/p>\n<p><img decoding=\"async\" style=\"float: left; max-width: 85px;\" src=\"https:\/\/duip7hn7nchpo.cloudfront.net\/editor-circle-louis-basenese.jpg\" alt=\"Louis Basenese\" \/><\/p>\n<p>Last week, senior analyst Jonathan Rodriguez brought down the curtain on one of the most successful yet misunderstood investment strategies of the last 50 years: <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/07\/13\/achieving-alpha-momentum-stocks\/\" target=\"_blank\" rel=\"noopener\"><strong>momentum.<\/strong><\/a><\/p>\n<p>You\u2019ll recall that the strategy involves buying the stocks trending higher and shorting the market\u2019s weakest-performing stocks.<\/p>\n<p>Like an avalanche, some stocks tend to follow their current trajectories \u2014 and often accelerate under the right conditions.<\/p>\n<p>Many \u201cvalue\u201d-oriented investors are baffled by this technique. Instead, they prefer to buy the weaker names and then sell relatively expensive names.<\/p>\n<p>But this strategy has been lining the pockets of hedge fund managers for years and doesn\u2019t require you to chase pricey stocks, either.<\/p><div id=\"inves-780634066\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>And the strategy works whether you\u2019re an investor trading on fundamentals or someone who trades based on a stock\u2019s price chart.<\/p>\n<p>Today, Jonathan is going to break down this strategy even further with an example\u2026<\/p>\n<p>Ahead of the tape,<\/p>\n<p>Louis Basenese<br \/>\nChief Investment Strategist, <em>Wall Street Daily<\/em><\/p>\n<hr \/>\n<h2 class=\"centered headline\">Buy High\u2026 and Sell Higher<\/h2>\n<p><img decoding=\"async\" style=\"float: left; max-width: 85px;\" src=\"https:\/\/duip7hn7nchpo.cloudfront.net\/editor-circle-jonathan-rodriguez.jpg\" alt=\"Jonathan Rodriguez\" \/>As I mentioned last week, the easiest way to find the market\u2019s hottest stocks is to look at a list of stocks trading at 52-week highs.<\/p>\n<p>Here you can find a <strong><a href=\"http:\/\/www.nasdaq.com\/aspx\/52-week-high-low.aspx\" target=\"_blank\" rel=\"noopener\">list of Nasdaq issues at highs<\/a><\/strong>. And here\u2019s a <strong><a href=\"http:\/\/online.wsj.com\/mdc\/public\/page\/2_3021-newhinyse-newhighs.html\" target=\"_blank\" rel=\"noopener\">list compiled by <i>The Wall Street Journal<\/i> on the NYSE<\/a><\/strong>.<\/p>\n<p>Before drilling down on that list, I\u2019d like to identify the market\u2019s strongest sectors. These sectors will likely hold the market\u2019s most attractive momentum plays.<\/p>\n<p>In the last year, the top three performers are financials (32%), technology (26%) and industrials (19%).<\/p>\n<p>Now you can focus your research on stocks making new highs in the sectors with the most action.<\/p>\n<p>Here\u2019s an example\u2026<\/p>\n<h2 class=\"subhead\">Big Gains With This Tiny Bank<\/h2>\n<p>Northeast Bancorp (NBN) is the bank holding company for Northeast Bank, which operates mainly in the six New England states.<\/p>\n<p>In the last year, the stock has gained 97% \u2014 outperforming the S&amp;P SmallCap 600 Financials Index (26%) by nearly four times.<\/p>\n<p>In other words, this stock is rocketing up the chart with significant force behind it and leaving its peers in the dust.<\/p>\n<p>Despite the sharp rise in shares, the company sports a market capitalization of less than $200 million, leaving plenty of room to grow.<\/p>\n<p>From a technical perspective, the stock is in an uptrend, well supported by its rising 50-day moving average. In fact, NBN hasn\u2019t closed below its 200-day moving average since last June.<\/p>\n<p>And a quick look at NBN\u2019s fundamentals proves just as promising\u2026<\/p>\n<ul>\n<li>Since 2012, the bank boasts an incredible earnings growth rate of 49% \u2014 besting the industry (8%) by more than six times.<\/li>\n<\/ul>\n<ul>\n<li>Shares trade at 19 times trailing earnings, well below the Russell 2000 (88) and the bank\u2019s own five-year earnings multiple (44).<\/li>\n<\/ul>\n<ul>\n<li>And on a forward basis, the stock trades at 12 times forward earnings \u2014 a discount to the banking services industry average of 26%.<\/li>\n<\/ul>\n<ul>\n<li>The stock could easily rise another 37% from current prices, to $30.08, using Northeast Bancorp\u2019s projected 2018 earnings of $1.88 and the industry\u2019s forward P\/E of 16.<\/li>\n<\/ul>\n<ul>\n<li>The stock trades at 3.7 times trailing sales, 12% below the industry average.<\/li>\n<\/ul>\n<ul>\n<li>The company has a debt-to-equity ratio of just 0.4 compared with the industry (0.7).<\/li>\n<\/ul>\n<p>So the stock is not only charging up the chart with force, but is also backed by solid balance sheet and attractive multiples.<\/p>\n<p>The easiest way to play momentum here: Scoop up NBN shares at market using the earnings-based $30.08 price target and a stop loss at $17.75 \u2014 a reward-to-risk ratio of 2:1.<\/p>\n<p>Simple enough, right?<\/p>\n<p>Done correctly, momentum investing is one of easiest ways to accelerate alpha in your portfolio.<\/p>\n<p>On the hunt,<\/p>\n<p>Jonathan Rodriguez<br \/>\nSenior Analyst, <i>Wall Street Daily<\/i><\/p>\n<p>The post <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/07\/20\/avalanche-effect-using-momentum-advantage\/\" rel=\"nofollow\">The Avalanche Effect: Using Momentum to Your Advantage<\/a> appeared first on <a href=\"https:\/\/www.wallstreetdaily.com\" rel=\"nofollow\">Wall Street Daily<\/a>.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By WallStreetDaily.com Value investors can\u2019t wrap their minds around this. The new normal: Buying high\u2026 selling higher. How this \u201cavalanche effect\u201d can make you rich. Also recommended: What to do when your stock is \u201cmarked.\u201d Last week, senior analyst Jonathan Rodriguez brought down the curtain on one of the most successful yet misunderstood investment strategies [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-109329","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/109329","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=109329"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/109329\/revisions"}],"predecessor-version":[{"id":109336,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/109329\/revisions\/109336"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=109329"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=109329"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=109329"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}