Momentum has always been a double-edged anomaly that forms the basis for trading strategies - kind of like betting on the fastest horse in the market. Some of the most common strategies are those following stocks that reach all-time highs or 52-week highs. These can be attributed to the need for solid sentiment on underlying fundamentals, catalysts from company deals and news, or even a change in management.
The core concept of following momentum is that stocks performing well in the recent past are highly likely to continue until their trend breaks. While this may be true in most cases, it can also be an unforgiving strategy for those who don’t understand it correctly. Stocks that rise high and fast may potentially fall hard should its catalyst or fundamental drivers change. In my view, combining momentum with other growth or value strategies can help lessen the risk thanks to a cushion provided by company financials and future outlook. This article will look at three stocks that recently made period highs for your consideration.
