If you're using a
momentum investing
strategy, you seek stocks that are rising in
price rather than those with flat or falling prices. The principle
behind this strategy resembles the law of physics that says a
body in motion is likely to remain in motion.
Momentum investors chart changes in price
and volume patterns to anticipate when a stock may be approaching
a cap or hitting a bottom. Hitting the high may mean the stock is
overbought
and will begin to lose momentum. Conversely, hitting a low may
mean the stock is
oversold
and will begin to recover.
Like other strategies whose success depends
on making a decision at the right time, momentum investing requires
regular attention.
