The Mystery and Madness of Momentum…and The Stocktwits 50

Momentum is a mystery to me. It is also maddening.

I mean both in a fantastic and exciting way.

Embracing the possibility of ‘who knows’ is a miraculous thing if you want to ‘Momentum Invest’. When momentum is happening, stocks move in ways that make you scratch your head. Overvalued stocks become SILLY overvalued stocks. At the end, as things get fun and each time you check your stock and expect to see it up 5 percent, the stock will break your heart. If you believe in the power of momentum, you will sound like a ‘loon’ in discussions about the stock market so keep it to yourself.

The goal of our weekly Stocktwits 50, is to bring the most maddening and sometimes mysterious companies to the forefront. They are not ‘sure things’ going forward, but as I have long believed and written about, momentum stocks and momentum moments can be captured by every investor.

I can’t be there to ring the bell for you, because no one rings the bell for me. But it is a lifestyle type of investing that can make sense for some.

Here is this weeks Stocktwits 50.

Because the market is strong, I am long quite a few of them.

Most importantly, As Ivanhoff describes in this week’s Stocktwits 50:

80% of the directional market moves tend to happen in just 20% of the trading days. A few times a year, the market wants to go up. In such periods, it is fruitless to fight the momentum as it feeds on itself. Higher prices boost risk appetite, which attracts fresh capital, which boosts prices even further. Portfolio performance suddenly improves, which encourages market participants to leverage their bets and fuel the momentum.

It is important to realize that the momentum party is not going to continue forever and to book profits along the way. When the curtains fall, everyone will rush for the exits at the same time and there will not be enough liquidity to meet the supply.