Momentum trading involves taking advantage of, and making profits from, upward trends in a stock.Picture Getty
Hot Money Monday: These ASX stocks have all the momentum, according to three technical signals
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Momentum trading involves taking advantage of, and making profits from, upward trends in a stock.
There’s a bit of risk involved in momentum trading because in essence, you’re making a decision to buy a stock based on recent buying activities by other traders.
So to be a successful momentum trader, one needs to be able to identify the best stocks quickly and accurately.
There are several ways to quantify momentum, and here we look at three main signals used by the market:
- 52-week high
- Simple Moving Average
- Relative Strength Index
10 ASX small caps nearest or at 52-week highs
Traders often view the 52-week highs as entry signals.
This is due what’s called the “52-week high effect” – where if a price has broken out above its 52-week range, there must be some factor that generated enough momentum to further continue the price movement in the same direction.
On the other hand, if a stock is far away from its 52-week high, chartists believe the momentum will continue going that way.
| Code | Name | Price | How far from 52-Week High? | 1 mth return | 6 mth return | 12 mth return |
|---|---|---|---|---|---|---|
| MAU | Magnetic Resources | $0.980 | 0.00% | 22.50% | 97.98% | 6.52% |
| ACP | Audalia Resources | $0.012 | 0.00% | 33.33% | 100.00% | 33.33% |
| JAV | Javelin Minerals | $0.001 | 0.00% | 9.09% | 20.00% | 0.00% |
| DCN | Dacian Gold | $0.300 | 0.00% | 168.18% | 251.19% | 110.71% |
| DTI | DTI Group | $0.024 | 0.00% | 20.00% | 50.00% | 9.09% |
| RC1 | Redcastle Resources | $0.020 | 0.00% | 33.33% | 23.08% | 6.67% |
| GDC | Global Data Centre | $2.070 | 0.48% | 14.05% | 39.86% | 52.21% |
| HLA | Healthia | $1.770 | 0.56% | 1.15% | 45.87% | 23.00% |
| MIL | Millenium Services | $0.620 | 0.81% | 50.00% | 86.36% | 28.13% |
| VMM | Virdis Mining | $1.1500 | 0.82% | 28.00% | 400.00% | 325.00% |
Magnetic Resources continues to deliver more outstanding drilling results. MLJRC806 intersected 126m at 2.82g/t from 180m and includes 62m at 4.09g/t from 244m, which ended in mineralisation. MLJDD031 intersected 21m at 5.37g/t from 198m.
Following completion of its due diligence, Javelin has decided not to proceed with the proposed off market takeover bid for Gecko Minerals.
The company will instead proceed with the capital raising announced on 6 September, and will seek approval at its AGM for the issue of 5,000,000,000 options to its corporate advisors. and for the consolidation of the company’s shares on a ten-for-one basis.
10 ASX small caps with prices above SMA
Simple Moving Averages (or SMA) is another indicator that can be used to gauge momentum.
SMA is often used to determine whether a stock price will continue in the same direction, or if it will reverse a bull or bear trend.
As a general rule, if the current stock price is above the SMA, the price trend is up. If the price is below the SMA, the trend is down.
| Name | Last Price Value | Price vs. 9 day SMA | Price vs. 14 day SMA | Price vs. 20 day SMA | |
|---|---|---|---|---|---|
| ADX | ADX Energy | $0.11 | >5% Above SMA | >5% Above SMA | >5% Above SMA |
| CT1 | Constellation Tech | $0.00 | >5% Above SMA | -1 to -5% Below SMA | < -5% Below SMA |
| BIT | Biotron | $0.09 | >5% Above SMA | >5% Above SMA | >5% Above SMA |
| BPH | BPH Energy | $0.03 | >5% Above SMA | >5% Above SMA | >5% Above SMA |
| BTC | BTC Health | $0.05 | >5% Above SMA | >5% Above SMA | >5% Above SMA |
| BUY | Bounty Oil & Gas NL | $0.01 | >5% Above SMA | >5% Above SMA | 1 to 5% Above SMA |
| CCE | Carnegie Clean Energy | $0.00 | >5% Above SMA | >5% Above SMA | >5% Above SMA |
| ZNO | Zoono Group | $0.05 | >5% Above SMA | 1 to 5% Above SMA | < -5% Below SMA |
| CLE | Cyclone Metals | $0.00 | >5% Above SMA | >5% Above SMA | >5% Above SMA |
| MHI | Merchant House | $0.06 | >5% Above SMA | 1 to 5% Above SMA | -- |
The home textile and footwear products company has decided to permanently cease operations at the FIT factory in the US.
The cessation of business follows continued losses generated by the business.
The closure will take place on 27 October, with a view to disposing of the business operations, subject to any regulatory or ASX approvals that may be required.
10 ASX small caps with low nine-day RSI (Oversold)
Here’s another momentum signal used by the market – the Relative Strength Index (RSI).
RSI is a measure of the strength of a stock’s momentum, either in the upward or the downward direction, and is used to indicate whether a stock is oversold or undersold.
Generally speaking, an RSI above 70 means a stock is overbought; and an RSI below 30 indicates that it’s oversold.
An RSI above 80 meanwhile is strongly overbought, and an RSI below 20 is strongly oversold.
| Code | Name | 2 Day RSI | 9 Day RSI | 14 Day RSI | 20 Day RSI |
|---|---|---|---|---|---|
| BP8 | BPH Global | -- | Oversold | -- | -- |
| FGX | Future Generation Australia | -- | Oversold | -- | -- |
| IPC | Imperial Pacific | Oversold | Oversold | Oversold | -- |
| WNR | Wingara Ag | -- | Oversold | -- | -- |
| ODE | Odessa Minerals | -- | Oversold | -- | -- |
| GWR | GWR Group | Oversold | Oversold | -- | -- |
| HRZ | Horizon Minerals | -- | Oversold | -- | -- |
| KME | Kip McGrath | -- | Oversold | -- | -- |
| LYL | Lycopodium | -- | Oversold | Oversold | -- |
| NMT | Neometals | -- | Oversold | -- | -- |
Odessa provided further update on the exploration program underway at its Yinnetharra Lithium Project at Lockier Range in the Gascoyne region of WA.
First assay results confirm fertility of Robinson Bore pegmatites to host lithium-bearing minerals.
First rock chip assays of pegmatites at Robinson Bore return up to 1097ppm Li2O, and 10 other samples above 500ppm Li2O.
Horizon confirmed that it has entered into a binding agreement with private company Charter Minerals for the acquisition of a 100% interest in two greenfield Lithium prospects near Bridgetown, less than 20km from the world class Greenbushes Lithium Mine, WA.
Horizon has also applied for five new Exploration Licences in proximity to the Charter tenements.
Neometals announced the results of trials on a new lithium recovery option for its Hub plant packages to be delivered under supply and technology licensing agreements to third-party customers.
New lithium recovery flowsheet has resulted in improved lithium yields from >83% to >93%.
Hydrometallurgical refinery trials produced lithium fluoride with +95% purity, which is expected to offer operating and capital cost savings.
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