Momentum and pattern methods are off to a roaring begin right here in 2024. As a rule, these methods purchase main shares that seem overbought. Shopping for shares that seem overbought usually goes towards our “intestine really feel”, however overbought circumstances replicate robust shopping for strain and that is clearly extra bullish than bearish. Let’s take a look at current examples utilizing the broader market and UBER.

Shares surged in early November with an S&P 1500 Zweig Breadth Thrust sign and appeared to be overbought by the tip of November. The S&P 500 and Nasdaq 100 have been up 8.9 and 11.4 p.c, respectively. TrendInvestorPro’s Composite Breadth Mannequin then turned bullish in early December and shares once more appeared overbought in late December. The S&P 500 was up 4.4% and the Nasdaq 100 was up 5.5% in December. Be aware that the Composite Breadth Mannequin is 14 indicator breadth mannequin used for broad market timing a TrendInvestorPro.

Regardless of massive strikes in November and December, shares didn’t cease rising on the finish of 2023. As a substitute, the advance continued in January-February with the Nasdaq 100 main. This advance then broadened out in March with the S&P 500 taking the lead. The Nasdaq 100 rose 1.2% in March and the S&P 500 surged 3.1% this month. Once more, the market seems to be overbought and ripe for a correction interval. Whereas I can not argue with this evaluation, I can not predict a pullback, particularly in a powerful uptrend. There will probably be a correction in some unspecified time in the future, however I have no idea when. Maybe we should always cease utilizing the time period “overbought” when the pattern is up and settle for overbought circumstances at face worth. Overbought is de facto simply one other method of claiming “robust”.

Twin Momentum Rotation methods are designed to benefit from main shares with robust worth strikes. The methodology buys the highest performing shares and sells after they drop under a sure rank. The chart under exhibits a commerce instance utilizing Uber Applied sciences (UBER). UBER entered the mannequin portfolio as a high ranked inventory on February fifth, and RSI was above 70 (inexperienced vertical line). RSI is taken into account overbought when above 70. In fact, a transfer above 70 displays robust upside momentum and that is extra bullish than bearish. Value moved increased and UBER’s rank then dropped by the tip of March (pink line). UBER not made the lower and this triggered an exit sign.

Specializing in the strongest shares throughout the Nasdaq 100 and S&P 500, the Twin Momentum Rotation Methods at TrendInvestorPro are up double digits thus far this yr. Watch out chasing efficiency as a result of it’s not all roses when buying and selling the leaders and there will probably be drawdowns alongside the way in which. These methods have been down in 2022, they recovered properly in 2023 and there have been additionally drawdowns in 2023 (September). These methods are absolutely systematic and commerce on a weekly foundation. Rankings and indicators are posted each Saturday morning for subscribers. Click on right here to see efficiency metrics and be taught extra.

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