How To Use The Daily Momentum Brief
We have had a significant amount of interest in our ASX and US Daily Momentum Briefs since they launched last week. In today’s newsletter, let’s go over one of the ways you can use these free lists to your advantage.
The Daily Momentum Briefs provide the Top 25 and Bottom 25 stocks on the ASX All Ordinaries and the S&P 500, ranked by momentum. These rankings can be utilized within your trading arsenal to narrow down signals or as a screener for further research. We use a similar momentum ranking within our Trade Long Term portfolio, albeit with additional filters and safeguards. It is important to note that the Daily Momentum Briefs are not portfolios, and do not provide buy and sell signals.
One way to use the momentum lists is as a filter to identify high potential stocks for discretionary patterns. You can learn about identifying discretionary patterns through our free New Trader’s Blueprint.
Looking at the top 25 list within today’s ASX Daily Momentum Brief, Nuix Limited (NXL) catches my eye as a bullish pennant pattern. A pennant pattern is formed from a strong upward movement, creating the “flagpole”, followed by a short narrowing period of consolidation, creating the pennant. This consolidation suggests investors are undecided whether the price will continue in the same direction, but a breakout from this could see a revival of the momentum. Before placing this trade, I would want to look at the stock’s volume to confirm the pattern, and check there are no significant events such as takeovers, ex-dividend, or reporting dates that may cause a reversal.
Another stock of interest, Southern Cross Electrical Engineering (SXE), picked from within the ASX Daily Momentum Brief top 25, displays a continuation triangle. Similar to the pennant pattern above, the triangle shows a narrowing of the range as investors are poised to make a move. This pattern paired with declining volume shows a potential for a large move, hopefully continuing the strong momentum seen to date. Again, we need to check coming events and other data to confirm the signal.
If you’re interested in learning more about trading discretionary patterns, sign up for the free Daily Momentum Brief here and the New Trader’s Blueprint here. We also provide daily ASX and US discretionary analysis and chart research through our subscription membership.
