How to use momentum to swing trade | stockbee


How to use momentum to swing trade

BIOD: Biodel Inc. is a momentum stock. It has confirmed momentum since 5/29/2013 according to one year anchored momentum scans we use. The stock recently offered a good trading opportunity for a swing trade. 

12.84% profit in 6 days on BIOD

Momentum stocks once momentum is established do not go up continuously. They pause for some time and then have momentum bursts lasting 3 to 5 days. These momentum bursts can be of 8 to 40% magnitude.

This offers swing traders an opportunity to profit from these  kind of momentum bursts. The start of a momentum bursts is signaled by a range expansion signal. Everyday I scan for a range expansion on momentum stocks and then look for a low risk opportunity. A range expansion preceded by series of range contraction is a good swing setup.

The range expansion day is entry day. Such momentum bursts are often followed by 3 to 5 days of explosive move. In this case of BIOD at one stage the stock was up 30% or so in just 6 days before reversing and hitting stop.

The stocks with momentum show this phenomenon of momentum bursts and momentum pause several times during their entire move. This offers swing traders opportunities to capture such explosive moves.

Another example of this kind of swing move is on BITA yesterday.

BITA: Bitauto Holdings Limited 

The stock showed up in range expansion scan early in the morning. As you can see prior to range expansion there is a momentum pause of several days. From entry the stock is already up 10%.
Update: Closed the trade for 19% profit in a day by 10.10 AM. 

The momentum stocks offer several such explosive trade opportunities. In order to catch these kind of opportunities you need understanding of :

  • how momentum works. 
  • how to set up proper momentum scans
  • how to setup range expansion scans
  • how to setup guidelines for good momentum pause
  • how to setup guidelines for good entry day
  • how to exit
  • how to manage risk
  • how to determine good periods to enter these trades based on overall market direction
All the above requires building skills and building systematic approach step by step and following a set of rules. You don't need to know what these companies do or what is their earnings or growth prospect. This is just exploiting a recurring structural phenomenon in the stock market where momentum stocks show this kind of action. Whatever might be the reason for these momentum bursts or pauses, what we are interested in is to profit from them. 

There are many misconception about how momentum works and there are lot of people who get scared because of high volatility of the momentum stocks. But that is where the profit opportunity is for swing traders. If you can manage the risk you can find explosive opportunities in these momentum stocks. After all the momentum stocks are the fastest moving stocks in the market.

Are you serious about your trading?

If you are serious about your trading and want to build an enduring edge the Stockbee Member site might help you. Members tell me they have tried lot of things before coming to my site and it has offered them the most extensive and detailed methods to swing and position trade.

It is only for those who want to develop their own self sufficient trading method. It is not a stock picking service. It is service for you to build your own scans and trading method to have your own daily pick based on your method.

Be warned it will take you time to learn to trade. Learning to trade is difficult art and unless you are willing to spend months or years to perfect your strategy and also develop your mental edge you are unlikely to succeed in this game. Unless you understand that no site, no service, and no mentoring is going to work.

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The members site will give you in depth understanding to develop your own trading method. The emphasis is on making you self sufficient and confident of your own trading method and style.

As a member you will learn the basics of swing trading, momentum investing, growth investing and risk management.

You will learn about Stockbee Trend Intensity Breakouts method that uses momentum based swing trading to find 3 to 5 day swing trades for 8 to 40% profit.

You will learn about Stockbee Episodic Pivots Breakout method which uses Post Earnings Announcement Drift (PEAD) to find stocks that had a game changing earnings and that are likely to rally for 3 months to 12 months.

You will learn about  Stockbee Dollar Breakout method that uses momentum, range expansion and swing trading approach to find 5 to 40 dollar moves in high priced stocks.

You will learn about  Stockbee Lemonade Strategy for 401k which uses market timing and momentum to invest in 401k. You will get weekly update on how I am using the strategy on our 401k to do allocation decision.

You will learn about Stockbee Market Monitor method for market timing using breadth. It allows you to avoid risky periods in market and allows you to identify market turns. It is used for 401k allocation decisions.

You will learn about Stockbee Double Trouble method to find stock with confirmed upside momentum using anchored momentum and that are likely to continue their up move.

You will learn about Stockbee Night Time is Right Time method to find news catalyst based trade ideas for short term day trade and swing trade.

You will learn about Investor's Business Daily’s IBD 200 list and how it can be used to find swing trading candidates for explosive moves.

You will learn about Telechart 2000 and how to use it effectively to scan for swing and position trade ideas and to set up your 401k strategy.

You will learn about Jesse Livermore Range Breakout, Darvas Box setup, and many other member shared methods.

You will learn how to set up your own scans, select right kind of stocks, how to set up stops, when to enter , when to exit, how much to risk, how to track your trades and all other details about trading. You will learn about developing your own methods and not relying on others for trade ideas.

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If you are looking to develop your own trading strategy the membership site might be for you. You have to be willing to put in the effort to build your own method. There are no silver bullets offered on members site. Every method, every scan, every nuance is detailed and all possible help is offered to design your own method.

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Pradeep Bonde said...

Closed BITA for 19% profit in 1 day.

Sam Chen said...

Hi Pradeep,

what is criteria used for confirmed momentum? Using one year anchored momentum>90% or 95%?


Pradeep Bonde said...

It is 80% from the anchor point.

nico wabnik said...

Hi Pradeep,
how could i scan for these stocks by using


nico wabnik said...

Hi Pradeep,
How could i scan for these stocks using

Chris said...

Can you please explain what is anchored momentum? Thanks.

Pradeep Bonde said...

Nico I do not use Stockftcher so can not help on that.

Chrios Anchored momentum is a momentum calculated from an anchored point as against relative momentum rankings. It allows you to find start of momentum phase. For example say IBD relative strength rating of say 80 tells you stock is outperforming 80% of stocks. But it does not tell you when the stock started its momentum phase. While an anchored momentum tells you when the stock entered momentum phase and when its momentum phase was over.