Daily Gains Letter

Four Top High-Momentum Stocks to Watch

By for Daily Gains Letter |

High-Momentum Stocks to WatchThere is a lot of money trading the stock market each day, and this is especially true with the momentum stocks that are making many traders rich.

While anyone can trade momentum stocks, to make the real big money, you need to be trading big positions on these momentum stocks and be willing to assume the risk that the trade could go the other way. The key to trading momentum stocks is to make sure you are closely monitoring the price action and the volume on the bid side, especially. A major upward push in bids could foreshadow a pending upward move in the stock. The same can be said for rising volume on the ask side that could suggest traders are exiting the stock.

While there are numerous momentum stocks, the following are examples of momentum stocks that I believe offer the best opportunities as these companies are also leaders in their areas.

Facebook, Inc. (NASDAQ/FB) has been one of the top performers and momentum stocks since bottoming out in 2013. The social media company, with more than one billion subscribers, is managing to drive up its mobile advertising business and monetize its enormous user base. Facebook also made waves last week after the company announced it would be paying a whopping $19.0 billion in stock for four-year-old mobile messaging company WhatsApp. The company was clearly overpriced, but given that the stock price of Facebook has also risen extraordinarily, the $19.0-billion price tag doesn’t seem so bad.

At the low end of Facebook’s stock price at around $17.00 a share, the deal would have been valued at around $4.75 billion, which seems more reasonable. However, WhatsApp does bring more than 450 million subscribers with it; albeit, we don’t know how many of these subscribers are already Facebook users. The key for Facebook will be to continue to grow its advertising revenues and monetize its massive user base for this momentum stock to move higher.

A second momentum stock that I feel is tops in the technology space is Google Inc. (NASDAQ/GOOG). Despite trading at over $1,000 a share, the company has excellent long-term potential and is working on numerous innovative projects, from its self-driving car to drones and its recent $3.2-billion purchase of Nest Labs, Inc.—a developer of next-generation consumer devices for the home, such as thermostats and smoke alarms. Google sold off its mobile business to Lenovo Group Limited, but it will still market its “Android” operating platform. Watch for the company to split its shares to levels that will allow more investors to buy.

Another hot high-momentum stock is luxury retailer Michael Kors Holdings Limited (NYSE/KORS). Michael Kors is a retail sector play that is not normally associated with traders; however, this company is approaching the $100.00-a-share level and continues to be hot. In my view, Michael Kors is one of the top retail plays based on consistently excellent growth metrics regardless of how the economy is doing.

In the restaurant sector, a top high-momentum stock to look at is Chipotle Mexican Grill, Inc. (NYSE/CMG). After a small mishap in late 2012, the stock has been on fire and is rocketing up on the charts. The provider of higher-end Mexican fast food offers a better alternative to having to eat at Taco Bell. Chipotle is also moving in on the fast food space that has been largely dominated by McDonalds Corporation (NYSE/MCD).

Investors may want to take a look at these high-momentum stocks, but remember that trading these stocks requires more time and monitoring, so you must be prepared to put in the effort.

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