How to find explosive moves in stocks

Short term momentum swings in stocks are driven by supply demand imbalances. Periods of high demand or supply are followed by periods of low demand or supply. This creates momentum bursts in stocks moves.


A stock after going up pauses briefly, but any small catalyst can lead it to breakout of the range, this is noticed by market participants and then they enter in the hope of capturing the next part of the swing.

BVX is current example of this  kind of stock. It has gone up in 3 swings in last 3 months. The first swing was followed by minor 6 day pullback. The second swing was followed by 24 days sideways consolidation.


The underlying cause for stock momentum can be fundamental driven, news driven, sector driven, or often  sentiment driven. But no matter the cause basic tendency of stock is to move in momentum bursts of 3 to 10 days . These bursts are of 8% to 50% magnitude.

Once you understand this structural phenomenon of momentum bursts you can exploit it to capture short term swings of 3 to 10 days. Those swings offer 8% to 50% profit opportunities in short period of time. 


When swing trading these kind of moves it is critical to take profits into strength. Such momentum burst swings typically last for 3 to 10 days. If you overstay the trade then you can end of giving up bulk of the profit. 

If you want to profit from these kind of momentum burst, first start by studying such past moves a nd understand them. These kind of moves happen everyday.


Ron said...

Can finviz be used to scan for above setups?
Thank You

Pradeep Bonde said...

Not sure if it allows custom scans in free version.