When the markets are as whimsical as they are now,it’s tough to come up with a winning strategy. One could resort to commonly used techniques to find beaten down stocks that have the potential to recover faster than others, but this also has the risk of disappointment. Finding the current winners that have the potential to gain further should be a safer strategy instead.
In the stock game, winning means reaching a higher price. So how about looking at those that have already won the game and are ready to beat the benchmark that they have already set?
Sounds a good idea? Here is how to execute it:
One should primarily look for stocks that have been recently witnessing price increase. Actually, stocks seeing price strength recently have a high chance of carrying the momentum forward.
If a stock is continuously moving higher, there must be a good reason for the rise or else it probably would have fallen like others.
Nevertheless, recent price strength alone cannot create magic, so you need to set other relevant parameters to create a successful investment strategy. Here’s how you should create the screen for shortlisting the current as well as the potential future winners.
Percentage Change in Price (4 Weeks) greater than zero:This criterion shows that the stock has moved higher in the last 4 weeks.
Percentage Change Price (12 Weeks) greater than 10:This indicates that the stock has seen momentum over the last three months. This reduces the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market for a very short period.
Zacks Rank 1:No matter whether the market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance.
Average Broker Rating 1:This indicates that brokers are also highly hopeful about the future performance.
Current Price greater than 5:The stocks must all be trading at a minimum of $5 or higher.
Current Price/ 52-Week High-Low Range more than 85%:This criterion filters those stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.
Here are five of the 10 stocks that passed the test:
KT Corp. (KT)
Daqo New Energy Corp. (DQ)
Forestar Group Inc. (FOR)
pdvWireless, Inc. (PDVW)
Alleghany Corporation (Y)
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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KT CORP (KT): Free Stock Analysis Report
DAQO NEW ENERGY (DQ): Free Stock Analysis Report
ALLEGHANY CORP (Y): Free Stock Analysis Report
FORESTAR GROUP (FOR): Free Stock Analysis Report
PDVWIRELESS INC (PDVW): Free Stock Analysis Report
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