Fast momentum cycles | stockbee


Fast momentum cycles

What has happened since March 2009 bottom is that we have very sharp momentum bursts. If you see this rally it effectively made 20% plus move in just 30 days. Blink and you missed bulk of it.
Same is true of sectors. Sectors make their entire moves in matter of 30 days or less in this market. A sector will breakout and bulk of the move will be over before most people realize that it is sector move. Look at Uranium or solar sector or cloud computing, or casinos, or fertilizer, or airlines. These sector had had intense short term momentum bursts where they made 20 to 40% moves in matter of days and cooled down.
There might be structural reasons for it as ETF have become very popular. Many times such moves tend to be driven by such structural changes. Some years back I was in India on holiday and looked at Indian stock market data and noticed some very rapid moves on a bunch of 50 to 60 stocks. Many of them did not have good fundamentals or reason for such wild moves. But there was a structural reason. Many mutual funds had been started in India in that year. Mutual funds as part of the overall market was very small in India, with the influx of huge sums of money, everyone was chasing same set of liquid 50 to 60 stocks, driving them up to crazy levels.
Similar thing is happening currently. A uranium ETF is planned for launch and in 5 days before its launch every shitty uranium stock goes up like crazy. The ETF buying in basket is creating some of these sharp moves.
The million dollar question then is how does one benefit from such moves. One way is by using Stockbee Trend Intensity breakout method which tries to capture momentum bursts. After studying the trades in last 2 years and studying how market momentum has changed I extensively retooled the momentum method to capture such short momentum bursts. That is why the Stockbee Trend Intensity Breakout method is performing well in this market. The other way is by using Bluefin Sector 50 and Emerging 50 list. That list is designed to capture such fast moves in sectors. It signals sector trend changes much faster than conventional methods of sector ranking. Sector accounts for 50% of the move and if you are in right sector you can make money with no pain. 
This sector momentum thing works on bearish side also. By the time people know that there is something called solar sector or rare earth sector or uranium sector the moves in those sectors are over. So many are constantly chasing the donkey's tail.
The markets have become fast in last 2 years and that has implications for your trading... and sooner you get it the better it is....


Bill said...

Can you elaborate on the Stockbee Trend Intensity Breakout method? Do you have a telechart scan?

Bill said...

Can you elaborate on Stockbee Trend Intensity Breakout method? do you have a telechart scan?

Pradeep Bonde said...

It is basically a faster version of the momentum method like Double Trouble and Modified Double Trouble. It calculates trend intensity and gives it values and buys only stocks with trend intensity above a particular level. Once a stock has established a certain level of trend intensity based on its last 65 days trading history, I wait for a consolidation/pullback in that stock and enter as it is breaking out. It primarily catches fast momentum bursts in the market. It is swing trading method aimed at finding 10 to 30% kind of explosive moves in few days or weeks.

Bill said...

Thanks for explanation. Can you share your telechart scan?