Tuesday, October 2, 2007

A Word About Momentum

A lot of people who track my picks and track my trading on WallStreak sometimes think I am crazy by the bold calls on some momo names. But a lot of people do not understand the power and the mechnanics behind momomentum. To me, i do not even look at how many points or how much percent the stock is up. That alone clouds the jugdement and analysis. I look at the charts and what is it telling me about supply vs demand. I like to look at the aggression/power of the move and the volume and most importnatly, i always look at how the stock consolidates and contracts after periods of expansion(regardless of the timeframe). If the contraction looks corrective and constructive, then i get very very excited and i cannot buy enough it seems.
Look at BIDU today, it gapped up 20 points and a lot of people right away stopped looking at it, b/c they saw that 20 pts, then, they saw 22, 24, 25, 27, 29, etc. the whole time people were thinking it can't go any higher, smart momo traders were buying that stock up and forcing shorts to cover at any price and at one point BIDU was up almost 40 pts.
I let the stock or market tell me the story and i simply listen and don't ask questions. It's hard to figure why and how far a stock/market runs but the most important thing to know is that it is running. Go with it. That's my two cents.

1 comment:

Glenn said...

well said, thanks

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