4 Key Indicators To Hunt Down Hot Momentum Stocks

[RagingBull Elite]( Dear trader— Jeff Bishop here, It’s no news to you that this past week brought in exactly the craziness that we, traders, thrive on. Without any doubt, the key theme was and remains the accelerating momentum in highly volatile names. GLSI pulled off an absolutely historic intraday run after spiking from $5 to more than $120 on Wednesday. Many others - SLS, for one - followed suit, albeit in a more modest fashion. High momentum allows for very large gains should you be on its right side, but creates equally outsized risks for those caught in a bad spot. At times like this, it is encouraged to follow your rules and force discipline in every position. Back to the more optimistic tone though, here are some of the best ways to spot momentum names as they develop: 1) Look For A Catalyst This one is often overlooked by traders who are too lazy to do any homework. More often than not, they even get away with it because they trade purely on the technical analysis of the stock. However, every once in a while, they find themselves in a sticky situation when technicals don’t really matter. I am talking about situations such as when a company declares bankruptcy, gets investigated by the SEC, achieves primary endpoints in a phase 3 drug trial. Think of knowing a catalyst (or absence of one) as putting on a seatbelt in your car: most of the time you will be safe, but there’s a chance it might save you. On the other hand, trading on the side of the catalyst can provide an edge. 2) The float of the stock lets us know the share supply Why is it so important? The float indicates how many shares are circulating and available to be bought or sold by the general public. The number is calculated by subtracting any restricted stock from the total amount of shares outstanding. The critical part of the float is that it often has an inverse effect on the volatility. It’s basic supply and demand in my opinion— if the demand is present and supply is limited, the stock has a higher chance to go up. Whenever you hear about stocks that go absolutely crazy (like DRYS went from $3 to $100 within 5 days back in 2016), they are usually low floats. With GPRO, the float is about 127M, and while it’s not a low float… there really aren’t that many shares available, when you compare them to large caps. Next up, another indicator to use in tandem with float is the short interest. 3) Short interest tells us if there can be an uptick in demand. Short Interest is how many shares are being sold short. It is usually expressed as a percentage. For example, If the float is 100k shares and 20k shares are being sold short, then the short interest is 20%. It is also something that affects the supply mechanics: while short interest is not a part of the calculation of the float, in reality, it further limits the amount of stock available to buy. If the stock starts rallying and the short interest is high while the float is low, short-sellers will start covering their shares circulating the same limited supply causing what is called a short squeeze. Which in turn causes other shorts to feel the pain and cover even higher. Think of it as a short-seller stampede. So GPRO had about an 8% short interest, and on 127M shares… that’s a pretty hefty amount of shares short. In other words, if the shorts get squeezed the stock had the potential to break out. 4) Easy to borrow vs Hard to borrow Shorting a stock isn’t always free. To get short, the broker has to be able to borrow the shares and deliver them to their new owner by the settlement date. Shares of a stock you’re trying to get short can fall into one of the following categories: - Easy-to-borrow (ETB): a lot of borrowable shares are available - Hard-to-borrow (HTB): few shares are available and if you want to get them— you’ll likely have to pay a fee - None-to-borrow (NTB): your broker can’t find any shares and getting short isn’t possible This metric can be a good indicator of how aggressive short sellers can get— and therefore, how likely they’re to end up in a bad spot. Sometimes, low float stocks will have ETB shares on day 1, which attracts the shorts. Then on day 2 or 3 a fresh set of buyers comes in and triggers the shorts from day 1 to cover. That cycle could go on for multiple days. Ultimately, on the day the stocks finally top out, shares are almost always HTB or NTB. The last indicator just improves the conviction, but to me… the first three indicators will be crucial. [How I Trade Big “Gaps” in the Market]( By Ben Sturgill of Daily Profit Machine --------------------------------------------------------------- [The Anatomy of A Catalyst]( By Kyle Dennis of Biotech Breakouts --------------------------------------------------------------- [3 Stocks Moving on News]( By Jeff Williams of Penny Pro To Your Success, The RagingBull Team RagingBull, LLC 62 Calef Hwy. #233, Lee, NH 03861 [Click Here to stop receiving emails from support@ragingbull.com]( [Unsubscribe from all RagingBull emails]( DISCLAIMER: To more fully understand any Ragingbull.com, LLC ("RagingBull") subscription, website, application or other service ("Services"), please review our full disclaimer located at [(. FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. AnyRagingBull Service offered is for educational and informational purposes only and should NOT beconstrued as a securities-related offer or solicitation, or be relied upon as personalizedinvestment advice. 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