Stock market commentary, analysis, insight and opinion of the RightLine Editors is available every Tuesday/Thursday evening & Saturday
afternoon. The following is excerpted from the:
April 27, 2017 - The RightLine Report
Notes From The Editor
"Momo" is a slang term used to describe an investment purely as a momentum play with little or no concern about the company's fundamentals. Traders who follow this strategy believe that stocks in a trend are more likely to continue in that direction than stocks which are not trending or have recently reversed trend.
I guess you could say that most of us are Momo traders in some sense of the word. Anyone who believes that "the trend is your friend" would probably agree. However, momentum plays are just one of several methods that we can choose from.
For example, just as the Momentum Play is built on the solid trading principle of "trend," the Squeeze Play is founded on the principle of volatility expansion. Volatility has a proven tendency to contract, and then expand, and then contract again.
This cycle is repetitive. Once the contraction phase ends and the expansion phase begins, you can usually count on the expansion period to continue long enough to gain a profit from the related price move.
Successful traders often disagree over how to pick the best stocks, or which entry methods to use. However, most, if not all, winning traders use a methodology grounded in risk management.
No matter what you call it, a consistently profitable trading method is a good trading method. I can't explain why some investors look down their noses at others, as if to say "my method is the only good method." Labeling other traders and investors creates prejudice against tactics that often turn out to be based on solid market principles.
- Thomas Sutton, Editor
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