The U.S. equity markets have experienced significant fluctuations in recent trading days due to ongoing tensions involving potential new tariffs from President Trump and retaliatory measures from Beijing, resulting in escalating trade conflicts that appear to be intensifying. Although Trump raised the possibility of implementing a 100% tariff on Chinese imports following Beijing's heightened restrictions on rare earth metals—crucial for producing semiconductors and electronic products—he also showed some flexibility to maintain dialogue. Nevertheless, as Beijing refused to purchase American soybeans, Trump warned of a potential ban on cooking oil, worsening the situation.
In addition to existing challenges, the U.S. government shutdown, now in its third week, has started to affect investor confidence as uncertainty about the return to normal federal operations has caused stock prices to decline and increased market fluctuations. Nevertheless, a stronger-than-expected beginning to the earnings season, driven by strong results from major banks, has helped restore some of the lost optimism. Amid the unpredictable nature of the market, investors frequently turn to proven strategies that have historically generated consistent returns. One of the most effective approaches to overcoming market downturns is to invest in momentum stocks, such asShopify Inc. SHOP, Robinhood Markets, Inc. HOOD and Credo Technology Group Holding LimitedCRDO when either value or growth investing does not produce the expected returns.
This method largely adheres to the saying, "the trend is your friend." At its foundation, momentum investing involves "buying high and selling higher." It relies on the concept that when a stock starts a trend, it has a greater chance of continuing in that direction due to the existing momentum. Momentum investing is a strategy to gain from the typical human inclination to project current trends into the future. It is grounded in the period before prices return to a more balanced state, meaning before they become rational again.
Momentum strategies have proven to generate excess returns over extended periods and across different market conditions. As a result, executing this approach can be challenging, since identifying these trends is not straightforward. In this case, we have developed a strategy to assist investors in capitalizing on rapid price movements and achieving significant profits. Our screening process will enable you to take advantage of long-term price momentum combined with short-term price corrections.
Momentum Anomaly Stock Selection Criteria
Price Change Percentage (52 Weeks) = Top #50:This identifies the top 50 stocks showing the highest percentage price increase during the past 52 weeks. This criterion helps us select the strongest performers that have shown consistent growth over the last year.
Percentage Change in Price (1 Week) = Lowest #10:From the previous list of 50 stocks, we then select those that are also in the top 10 worst performing ones over a brief one-week span. This criterion identifies the stocks that have experienced a temporary decline in their price.
Zacks Rank #1:Stocks with a Zacks Rank of #1 (Strong Buy) have a track record of exceeding expectations regardless of the overall market environment. You can observethe full list of today's Zacks #1 Rank stocks here.
Momentum Style Score of B or Better:A high Momentum Style Score simplifies the screening process by considering multiple elements such as changes in volume and performance compared to similar stocks. It helps identify the optimal time to purchase a stock and capitalize on its momentum with the greatest likelihood of success. Stocks that have a Momentum Score of A or B, along with a Zacks Rank of 1 or 2 (Buy), consistently surpass other stocks.
Price exceeds $5:All stocks must be trading for at least $5.
Market Value = Top #3000:We have selected stocks that rank within the top 3000 by market capitalization to guarantee price stability.
20-Day Average Volume exceeds 100,000:A high level of trading activity makes these stocks simple to trade.
Here are three of the five stocks that passed this filter:
Ottawa, Canada-based Shopifyis a top global e-commerce platform that assists in launching, growing, promoting, and managing a business of any scale. Its platform and services are designed for ease of use and dependability, providing an improved shopping experience for customers around the world. Sellers utilize the company's extensive, multi-channel e-commerce platform to operate their business through various sales channels, such as online and mobile stores, brick-and-mortar locations, social media stores, and online marketplaces.
The stock has increased by 90.8% over the last year but dropped 6.1% in the past week. Shopify holds a Momentum Score of A.
Based in Menlo Park, CA,Robinhood MarketsA financial services company provides trading opportunities in cryptocurrencies, stocks, options, exchange-traded funds, cash management, margin, and securities lending, along with Robinhood Gold. The business seeks to make finance more accessible via its commission-free trading approach, introduced in 2013, without requiring any minimum account balances. The company operates in the United States, the United Kingdom, and certain European Union regions through its applications and affiliated companies.
The stock has increased by 398.1% over the last year but dropped 11.1% in the past week. Robinhood Markets holds a Momentum Score of A.
Located in the Cayman Islands, Grand Cayman,Credooffers a range of high-speed connectivity options for optical and electrical Ethernet and PCIe applications worldwide. It strives to transform high-speed connectivity by providing advanced solutions that facilitate complex AI-powered applications. The company delivers quicker, dependable, energy-saving, and expandable solutions that meet the rising demands of AI, cloud computing, and large-scale networks.
The stock has increased by 255.3% over the last year but dropped 11.7% in the past week. Credo holds a Momentum Score of A.
You can access the remaining stocks on this list by signing up today for a 2-week free trial of the Research Wizard and begin utilizing this screen in your trading. Additionally, you have the option to develop your own strategies and test them prior to making any investment decisions.
The Research Wizard is an excellent starting point. It's user-friendly. All content is presented in simple language. Plus, it's very straightforward to navigate. Begin your Research Wizard trial right away. The next time you read an economic report, launch the Research Wizard, input your findings, and discover what valuable insights emerge.
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Disclaimer: Officers, directors, and/or employees of Zacks Investment Research may have ownership or have engaged in short selling of securities and/or may hold long and/or short positions in options referenced in this content. An affiliated investment advisory firm may also own or have sold short securities and/or hold long and/or short positions in options mentioned in this material.
Disclosure: Information regarding the performance of Zacks' portfolios and strategies can be found at: https://www.Healthy urvival/performance.
This piece was first released on Zacks Investment Research (Healthy urvival).