Chartists looking for momentum leaders should consider multiple timeframes. Stocks may be leading the last 200 days but lagging the last 100 days. Similarly, a stock may have shown a significant increase over the last 100 days, but has still fallen over the past 200 days. By measuring performance over different timeframes, you can identify stocks that are consistently performing well.
The first chart shows TJX Cos (TJX) with rate of change (ROC) indicators covering 100, 150 and 200 days. Hench, three of his ROCs. The rate of change is simply the rate of change over a specified timeframe. TJX is up about 29% over the last 200 days (bottom window) and up about 20% over the last 150 days. However, it has been flat over the last 100 days and has been sluggish in this timeframe (yellow shading). TJX is not a consistent and sustained leader as it limps on the 100-day timeframe.
The chart below shows HubSpot (HUBS) and three different ROC stories. All three are above 50%, showing strength across all three timeframes. HUBS is now a consistent and tenacious leader. This is the name put on the watch list of tradeable pullbacks, or the portfolio of momentum leaders.
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CMT’s Arthur Hill is the Chief Technical Strategist at TrendInvestorPro.com. Focusing primarily on US stocks and ETFs, his systematic approach to identifying trends, finding signals within trends, and setting key price levels has earned him a high reputation as a market technologist. . Arthur has written articles for numerous economic publications, including: Barons and Stocks & Commodities Magazine. In addition to her Chartered Market Technician (CMT) qualification, she holds her MBA from Cass Business School, City University, London.learn more