Momentum Trades

jim_wirtz

As a brand new user of 'Stockcharts' and as a momentum trader, how do I use 'Stockcharts' to find rising stocks, for short term gains? (preferably 1 to 2 weeks). Does any one have a process that is profitable?
Thanks in advance.

markd

Here's a start -

stockcharts.com/school/doku.php?id=chart_school:trading_strategies:moving_momentum

Then, here's an idea I have been playing with. You would have to thoroughly test it out yourself, because I haven't, so I don't know if it's long run profitable:

On the daily chart, find stocks that have a rising long term average (200 or 251) and a rising intermediate term average (50 or 63) above the long term average.

Apply an ADX Line with +DI and -DI (63) and Fast Stochastics(21,1)

When the ADX Line is rising and and +DI (green line) is above -DI (red line), then look for Fast Stoch %K to break 50 or 20. That's the set up. Then look for bars that indicate seller exhaustion - the best seem to be higher volume bars that close down but near the very top of the bar, leaving a pretty long tail. These don't always happen, but seem to be a good sign when they do. The entry could be on the next open, or a buy stop above the high of the signal bar. Your initial stop could be below the low of the signal bar. The exit could be a stop under a high volume bar low after K21gets above 80.

If the ADX line has turned down while +DI stays above -DI, there may still be a trade but the market is getting mixed so there's more risk and likely less reward.

Again - test this out on at least 40 or 50 stocks in four or five different years over the last, say, fifteen years so you see how it works in different markets and on different stocks. The best sectors to investigate are probably Healthcare - like Pharmaceuticals, Technology and Consumer Discretionary. It probably works better on higher market cap stocks.