Momentum Trading Strategy

Notes

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$LSCC ×
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Nothing Lasts Forever. Don’t Fall in Love With Any Stock.

Some of the market’s biggest winners over the past year have now broken down. At least for the moment, their runs appear to be over.

AXTI delivered enormous gains over the last year, but it has now fallen below its 50-day moving average and is heading toward the 200-day. Its 10-day and 20-day lines are declining, and the 50-day is beginning to roll over.

LITE, CIEN, VICR, AAOI, VIAV, TTMI, FIX, COHR, and several other former leaders have also broken down or suffered significant technical damage.

Many more are sitting in the danger zone near their 50-day moving averages. That includes the memory names SNDK, WDC, STX, and MU, along with other hot names from hot groups VPG, MBIS, MXL, LSCC, MRVL, TER, VSH, STM, ADI, INTC, TSM, LRCX, COHU, PDFS, and others.

The bottom line is that many of the stocks that have driven this market, particularly the memory, semiconductor, and telecom names, have either already broken down or are now testing a critical area around their 50-day lines.

I have not needed to share many new tickers from week to week because the same names I have discussed throughout the year continued to lead. There was no reason to constantly search for something new when the existing leaders were still working.

But nothing lasts forever.

Many of the stocks that worked all year are now either ending their runs or approaching a decisive point. Do not fall in love with any stock. Respect the price action and let the market tell you whether the trend is still intact.

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Most Traders Miss This Part of CAN SLIM

This is what acceleration looks like.

One thing I teach inside the Momentum Trading Strategy Course is that it is not just about finding stocks with big earnings and big sales.

It is also about spotting the turnaround and the acceleration.

That is exactly what you can see here with LSCC.

Sales went from negative year-over-year quarterly growth…

To positive…

To accelerating.

And as sales improved, earnings started to improve too.

Now the forward estimates are showing a major ramp.

LSCC is not just showing strong relative strength.

It is also showing the type of fundamental acceleration that growth stock traders should be paying attention to.

This is not something I made up.

William O’Neil talked about this.

Mark Minervini and David Ryan have talked about this.

The best growth traders are not only looking for big numbers.

They are looking for whether the numbers are getting better or getting worse.

A stock with decelerating growth can look great on the surface, but the market may already be moving past it.

A stock going from negative growth, to positive growth, to accelerating growth can be the start of a major institutional re-rating.

That is what I like about LSCC here.

  • Strong price action.

  • Strong relative strength.

  • Improving sales.

  • Improving earnings.

  • Big forward estimates.

That is the kind of combination I want on my radar.