All eyes on Fed

In last few years Fed action has been the major game changer. Rallies have started and ended based on Fed action or hint of action. Today will be similar day. Dovish Fed will lead to fresh rally. Hint of tapering might lead to selling.

The underlying setups on momentum stocks show majority in bullish mode. Most are showing orderly pullbacks. Market is within few % of recent high, that is being reflected in individual setups.

Top 25 stocks ranked by momentum 

1. vnda
2. clvs
3. plug
4. sgoc
5. beat
6. zlc
7. yrcw
8. kndi
9. csiq
10. htch
11. bldp
12. uqm
13. mnkd
14. dang
15. hygs
16. tsla
17. acad
18. acrx
19. nlst
20. immu
21. esi
22. nvtl
23. sune
24. aegr
25. hsol

Emerging market weakness

The emerging market are tanking in last few days. Most of them are down 8 to 10% in few weeks. All signs point to asset relocation trades out of them. The emerging markets have historically been vulnerable to such hot money flows.

The US market so far has held up well and is down just around 4% from high. How long it can hold , we do not know. But it is time to be cautious and protect capital. One of the advantage individual investors have is speed and flexibility. You don't have to play in unfavorable circumstances unless you are day trading.

Corrections like these lead to churn in momentum ranking. But the top 200 stocks with momentum are the one to watch closely during this time as some of them hold up well and wait out the correction. When the market bounces back the stocks with momentum are not the only one which bounce back, but stock ranked at bottom by momentum also bounce back and often make big moves. So watching both end of momentum spectrum during correction is good to find future winners. 

OSTK worth watching

The market suffered gap down as global market sell off hit the US shores. IKt was a whipsaw territory with some recent breakouts gapping down. There was an attempted bounce, but it failed. However the breadth was not overwhelmingly negative. The $bpnya is down to 74 from elevated levels of 79 few weeks ago.

The vast majority of stocks continue to hold their gains and the setups on the momentum stocks continue to show continuation pattern rather than topping patterns. Lot more selling will be required for those setups to deteriorate.

Top 30 stocks by momentum

1. CLVS
2. LAS
3. VNDA
4. PLUG
5. MNKD
6. YRCW
7. VRML
8. CSIQ
9. ZLC
10. CLSN
11. LPTH
12. HTCH
13. TSLA
14. ENG
15. AEGR
16. DANG
17. BLDP
18. CLFD
19. SUNE
20. MVIS
21. TSRO
22. IMMU
23. TEAR
24. ACAD
25. CLNT
26. HSOL
27. HUSA
28. NLST
29. ACRX
30. INSM
31. ESI
32. TMUS
33. OSTK
34. ET
35. NVTL
36. YY
37. ABFS
38. ANW
39. WTSL
40. PXLW
41. KNDI
42. BIOD
43. MTSN
44. IQNT
45. JASO
46. PCO
47. UNIS 
48. SCTY
49. STEI
50. ACTV

TSLA, YRCW, OSTK, WTSL, and RH are some of the stocks setting up well. OSTK is the best out of that with recent earnings surprise. 

Any high volume breakout on this will make me a buyer . It also has low float and comparatively high short interest with 24% of float short. This kind of situation can lead to explosive moves. 

The underlying setups in momentum stocks

The momentum stocks operate in the context of overall market trend. But many of them go their own way. On a negative day like today at open, the one that buck the selling are something to keep an eye on.

Going through around 200 stocks ranked by momentum yesterday night, there were lot of them holding up very well. You will see stocks like nflx, oww, llen, nxst, rmbs, diod, imos, pcrx, ilmn, staa, mini, byd, wetf, glf and many others holding up well. Most of them are going sideways and potentially those kind of moves resolve in breakout.

Unless we see damage to underlying setups, the benefit of doubt is still to bullish side.

Top 25 stocks by momentum

1. las
2. clvs
3. vnda
4. plug
5. yrcw
6. csiq
7. mnkd
8. clsn
9. zlc
10. tsla
11. htch
12. lpth
13. aegr
14. eng
15. dang
16. bldp
17. husa
18. clnt
19. sune
20. mvis
21. nsph
22. hsol
23. tear
24. immu
25. insm

Focusing on momentum stocks keep you in the fastest moving stocks in the market. These are the stocks the market favors currently for whatever reason. 

A 5% correction

Market had a 5% correction from  recent high on intraday basis. That resulted in aggressive pullback buying on Friday. If the market builds on the bounce then the move will continue.

During this brief correction, most momentum stocks held up well and many had orderly low volume p[pullback. Now they have started to breakout. Most stocks with momentum are not much dented by this correction, that is good sign.

Top 30 ranked stock by momentum

1. las
2. vrml
3. vnda
4. clvs
5. yrcw
6. clsn
7. plus
8. csiq
9. tsla
10. mnkd
11. htch
12. zlc
13. aegr
14. lpth
15. clnt
16. husa
17. scty
18. bldp
19. sune
20. dang
21. insm
22. mvis
23. nsph
24. hsol
25. tmus
26. immu
27. tear
28. ostk
29. acrx
30. tsro

OSTK is one good setup. It has gone sideways for a month in orderly manner. It also had series of recent earnings surprises. If it breaks out from here on high volume , it can make 20 to 30% move. 

If you look at the top ranked 30 stocks by longer term momentum of year plus then you will see lot more good setups in them. The stocks with longer term momentum did not correct much during this correction. Most went sideways.

Top 30 ranked stocks by one year momentum

1. rvlt
2. acad
3. srpt
4. mtg
5. ecty
6. cbk
7. rsol
8. clvs
9. vips
10. las
11. aegr
12. clwr
13. spwr
14. rdn
15. sune
16. htch
17. pamt
18. nsxt
19. kerx
20. himx
21. evc
22. jks
23. tvl
24. bont
25. amri
26. insm
27. mnkd
28. csiq
29. gmcr
30. ostk

In this list rvlt, mtg, spwr, rdn, htch, nxst, kerx, himx, evc, amri, gmcr, and ostk are some good setups to watch for possible breakout. 

Momentum and resiliency

A good trading candidate should have both momentum and resiliency. Momentum helps you find fastest moving candidate so that you can expose your money to fastest moving stocks. But resiliency is the ability of stocks to correct very little during correction or to bounce back quickly from any pullback.

Resilient stocks can go up while the market is going down. VNDA is one such resilient stock in Top 25 stocks currently.

Resilient stocks correct very little during market correction. Some of the solar stocks are showing this kind of behavior currently and

Resilient stocks bounce back quickly from selling and pullbacks.

These are the kind of stocks that can make longer duration moves in momentum stock universe. Some stocks have just one or 3 day big momentum move and that is the end of momentum for them. Example of that is CLNT or RSOLor JASO.

The stock like MNKD is a good example of stock with both momentum and resiliency. It has held up to its momentum for multiple month.

Momentum phases end when this resiliency ends and stock corrects and fails to bounce back after a reversal or failure.


Top 25 stocks ranked by momentum

1. vrml
2. las
3. vnda
4. plug
5. yrcw
6. tsla
7. csiq
8. scty
9. htch
10. mnkd
11. husa
12. clsn
13. bldp
14. zlc
15. aegr
16. hsol
17. clvs
18. insm
19. nsph
20. sune
21. noah
22. jaso
23. tmus
24. mvis
25. ostk

During a market correction resiliency becomes very important. Stocks that show it tend to be first to breakout once correction is over. To find such stocks focus should be on top 100 or 200 stocks ranked by momentum.

Currently lot of stocks are showing good resiliency and are setting up for breakout. 

Top 50 momentum stocks

The momentum stocks continue to show good action. Many are setting up well for breakout. In fact if you look at top 200 or so momentum ranked stocks you would see around 50 to 70 of them are under going orderly pullback and are consolidating in narrow range.

The underlying setups in market so far hints at possible more upside for the market once the indexes breakout above recent high.

RVLT is one of the example of that kind of setup. Stock has been in momentum phase since third week of January. Along the way it had couple of consolidations and pullbacks and now has been consolidating for 4 weeks near its high. If it continues to hold its gain, it will be a buy on breakout.

Top 50 stocks by momentum

1. vrml
2. yrcw
3. plug
4. vnda
5. tsla
6. scty
7. csiq
8. clnt
9. htch
10. husa
11. mnkd
12. bldp
13. zlc
14. hsol
15. insm
16. nsph
17. aegr
18. jaso
19. clsn
20. tmus
21. sune
22. noah
23. mvis
24. ostk
25. rvlt
26. gig
27. unis
28. rsol
29. iqnt
30. acrx
31. hygs
32. dang
33. wbsn
34. bont
35. stp
36. abfs
37. esi
38. yy
39. llen
40. clvs
41. wtsl
42. fdml
43. spwr
44. biod
45. immu
46. nvtl
47. lpth
48. fslr
49. fcel
50. smrt

The Top 200 stocks by momentum are good stocks to focus on for swing trading. Most of them exhibit momentum bursts that last 3 to 5 days and are of 8 to 40% magnitude. Such momentum bursts are signaled by range expansion after a period of pullback/consolidation. 

A look at longer term momentum plays

When looking at momentum stocks, it helps to look at both short term (65 days ) and longer duration (1 year) momentum ranking.

Shorter term momentum is good for swing trade ideas while longer term momentum plays offer potential candidates for longer duration trades.

Longer term momentum plays often have secular theme behind them and their momentum can persist for months or years.

Longer term momentum plays give you the luxury to research and find the catalyst behind such big moves.

Longer term momentum plays also tend to have larger pullback/consolidation periods from which they breakout.

RDN is one example of a longer term momentum candidate. It is ranked 9th by one year momentum. The blue area indicates when the longer term momentum phase on this stock started. Since then it setup twice for swing trade with month plus pullback/consolidation.


Top 25 stocks by one year momentum:

1. rvlt
2. acad
3. srpt
4. mtg
5. rsol
6. cbk
7. ecty
8. vips
9. rdn
10. sune
11. aegr
12. bont
13. clwr
14. chci
15. spwr
16. kerx
17. adus
18. htch
19. himx
20. nxst
21. fslr
22. mnkd
23. snts
24. csiq
25. tvl

Many of the stocks in this list are currently in consolidation/pullback mode. A breakout in overall market will have these stocks breaking out soon. 

No serious selling so far

The markets have been driven higher by Fed QE3. In last few weeks a hint of Fed tapering off QE has put little bit of pressure on the market. We have seen series of negative days. But no serious selling so far. A range bound action is happening at this stage.

The stocks with momentum continue to act well. Some are extended , some are reversing after a big move, and some are setting up for further gains. 

When market undergoes correction, many stocks with momentum continue to hold their gains and when market breakout to high again, they breakout. A consolidation/range bound action like we see currently is good for creating good setups on momentum stocks. 

MNKD is one of the stocks from Top 25 stocks by momentum that is possibly setting up for further gain. 

1. vrml
2. clnt
3. yrcw
4. scty
5. tsla
6. plug
7. htch
8. vnda
9. rsol
10. mnkd
11. jaso
12. insm
13. sdbt
14. mobi
15. husa
16. nsph
17. zlc
18. tmus
19. noah
20. hsol
21. rvlt
22. aegr
23. vrtb
24. ostk
25. unis

Choppy action

There is a subtle change in tone of the action. Below the surface many high flying stocks are now in correction and more are joining the rank. The Worden T2108 indicator is now at 53.97. That indicates only 53% of stocks are now above their 40 day moving average. The T2108 was at 74 just few days ago.

However dip buyers continue to be active and indexes have closed well of their high 3 days in a row. Hurry to sell is lacking.

The stocks with momentum are undergoing rotation and new stocks are emerging.

RVLT is ranked 16 by momentum and was consolidating for few days and had a nice breakout on high volume yesterday.

Top 25 ranked stocks by momentum

1. rsol
2. yrcw
3. vrml
4. scty
5. tsla
6. csiq
7. clnt
8. htch
9. jaso
10. plug
11. vnda
12. mnkd
13. noah
14. esi
15. tmus
16. rvlt
17. cnit
18. hsol
19. unis
20. insm
21. ostk
22. nsph
23. spwr
24. iqnt
25. sdbt

I am watching IQNT, ggs, lllen, ctrp, rh, chci and couple of more for possible breakouts from Top 100 ranked momentum stocks.