After wild market swings and intense volatility over the past week, the broader U.S. equity markets witnessed a healthy uptrend over the past couple of days as President Trump’s tariff war took a backseat. With temporary exemptions of smartphones, computers, semiconductors and other electronic products from “reciprocal” tariffs, stocks took a breather from the panic-stricken market sell-off. The markets were also buoyed by an apparent change in the tariff regime with a universal tariff rate of 10% on all imports except China.
However, the Trump administration has put the markets on tenterhooks by stressing that the exemptions were not likely to last long. Amid the vagaries of the market and related uncertainty, investors often seek to employ time-tested winning strategies to fetch sustained profits. One of the most successful game plans to beat the blues is to bet on momentum stocks, like Nordstrom, Inc. JWN, Expand Energy Corporation EXE and CME Group Inc. CME when value or growth investing fails to generate the desired profits.
This approach primarily tends to follow the adage, “the trend is your friend.” At its core, momentum investing is “buying high and selling higher.” It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. Momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. So, this strategy is quite tricky to implement, as detecting these trends is no child’s play. Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from both long-term price momentum and a short-term pullback in price.
Percentage Change in Price (52 Weeks) = Top #50: This selects the top 50 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get the best stocks that have appreciated steadily over the past year.
Percentage Change in Price (1 Week) = Bottom #10: From the above 50 stocks, we then choose those that are also among the 10 worst performers over a short one-week period. This parameter picks the ones that have witnessed a short-term pullback in price.
Zacks Rank #1: Stocks sporting a Zacks Rank #1 (Strong Buy) have a proven history of outperformance irrespective of the market conditions. You can see the complete list of today’s Zacks #1 Rank stocks here.
Momentum Style Score of B or Better: A top Momentum Style Score knocks out a lot of the screening process as it takes into account several factors that include volume change and performance relative to its peers. It indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), handily outperform other stocks.
Current Price greater than $5: The stocks must all be trading at a minimum of $5.
Market Capitalization = Top #3000: We have chosen stocks that are among the top 3000 in terms of market value to ensure the stability of price.
Average 20-Day Volume greater than 100,000: A substantial trading volume ensures that these stocks are easily tradable.
Here are three stocks out of the seven that made it through this screen:
Headquartered in Seattle, WA, Nordstrom is a leading fashion specialty retailer in the United States. The company offers an extensive selection of both branded and private-label merchandise, which are positioned in the upscale segment of the industry. It offers high-quality apparel, shoes, cosmetics and related accessories for men, women, young adults and children through a variety of channels such as Nordstrom-branded full-line stores, Nordstrom Rack stores, Jeffrey boutiques, clearance stores under the Last Chance name, Trunk Club clubhouses and Nordstrom Local. The stock has surged 35.7% in the past year but jumped a mere 4% in the past week. Nordstrom has a Momentum Score of B.
Expand Energy is a leading U.S.-based natural gas producer formed through the merger of Chesapeake Energy Corporation and Southwestern Energy Company. The all-stock merger, completed on Oct. 1, 2024, positioned Expand Energy as the largest natural gas producer in the country, leveraging a vast asset base across the prolific Haynesville and Appalachian shale plays. The transaction resulted in a combined entity with more than 5,000 gross drilling locations and an extensive inventory expected to sustain development for over 15 years. The stock has rallied 19.4% in the past year but gained 4.2% in the past week. Expand Energy has a Momentum Score of A.
Formed in 2007 by the merger of the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT), CME Group is the largest futures exchange in the world in terms of trading volume as well as notional value traded. Headquartered in Chicago, IL, it is the holding company for CME, CBOT, NYMEX, COMEX, NEX and their respective subsidiaries. CME Group offers a broad range of products covering major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities and metals. The stock has surged 27.3% in the past year but jumped a paltry 3.1% in the past week. CME Group has a Momentum Score of B.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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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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CME Group Inc. (CME) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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