AAPL ExampleHS

Momentum Trades


The Apple (AAPL) chart shows us a trend with good momentum especially through December and January. It has a number of key features:

  • above major resistance, ideally at new all-time highs
  • small pullbacks / consolidations holding the 8ema
  • larger pullbacks hold the 21ema
  • strong daily closes and weekly closes
  • holding the previous day's lows, especially on a closing basis
  • gaps higher do not close or hold the gap fill on a closing basis

Momentum stocks often have a weak open, with a spike down to find support followed by a rally throughout the session into a strong close. This is also true if we consider the week as a whole; the low of the week is often made on Monday or Tuesday and the highs of the week on a Friday. The ideal trade entry is therefore a spike down to support early in the week. A strong close to the week should follow through the next week where we can either exit on strength or if the 8ema breaks on a closing basis.

The concept of strong / weak closes is covered in more depth here.