Monday, October 8, 2007

Stocks in Runaway MoMo Mode

Stocks exhibiting full blown momentum like acceleration.


Prospectus said...

Hey Stewie, every single one of those look overextended to me. They may go to the moon, though. How do you tell when something is going to stall and when it looks like it's going to keep going? I'm trying to unlearn economics and what I think the markets "should" do and learn to follow what markets actually do.

BTW, I can see the nice bull flag on BIDU on that chart.

Time Is Money said...

Hi pro.
yes, no doubt they are 'extended' and 'overbought' but things can and usually do stay over bought for a long time and vice versa, stocks can and usually stay oversold for a lot longer than 'rational' minds believe too. Markets are irrational and if you want to profit you have to be a 'neutral observer' who places trades according to what you see and not what you 'think' or 'want' to happen.
Issac Newton said:
"The rate of change of momentum of a body is proportional to the resultant force acting on the body and is in the same direction."
To me, as a trader i interpret that as once a stock gets going and starts to breakout(if you have a good supportive mrkt of course), the trend will usually get stronger and stronger as more traders start to believe in the trend and usually a stock will attract more and more volume and as greed grows and trader anxiety increases, the stocks movement will become more and more irrational until we see a trend exhaustion and buying capitulation and the eventual trend reversal. But right now, i am not seeing that stage in any of the above mentioned stocks yet. Hope that helps you.

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