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 | 6 mth | 12 mth |
|---|---|---|---|---|---|---|
| HZN | Horizon Oil | $0.180 | 0.00% | 2.86% | 9.09% | 38.46% |
| DTI | DTI Group | $0.024 | 0.00% | 20.00% | 0.00% | 9.09% |
| SSM | Service Stream | $0.930 | 0.80% | 6.29% | 44.19% | 41.98% |
| MIL | Millennium Services | $0.615 | 0.81% | 50.00% | 80.88% | 33.70% |
| HLA | Healthia | $1.760 | 0.85% | 0.86% | 44.26% | 27.08% |
| C79 | Chrysos Corporation | $6.550 | 1.06% | 7.73% | 45.56% | 99.09% |
| CVL | Civmec | $0.940 | 1.57% | 3.30% | 27.89% | 42.42% |
| GNP | GenusPlus Group | $1.200 | 1.64% | 4.35% | 37.14% | 33.33% |
| GTK | Gentrack Group | $4.900 | 1.80% | 21.59% | 68.38% | 226.67% |
| ENA | Ensurance | $0.270 | 1.82% | 1.89% | 22.73% | 17.39% |
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 | |
| 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 | |
| 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 | -- |
First Lithium announced that its highly anticipated diamond drilling will commence soon at its priority 1 lithium prospect, Blakala, located on the Gouna Permit in Mali.
The drilling program has been designed to delineate the extent of known spodumene bearing pegmatites, with substantive surface expressions and will consist of 6,000m of diamond drilling to depths of up to 300m.
Two diamond drilling rigs to be commissioned on site, for imminent launch of aggressive 6,000m diamond core program.
Targeting extension drilling of significant surface expressions, with drilling to depths of up to 300m to test downdip extension.
Assays from first round of drilling are expected in 6-8 weeks.
The air traffic management solutions company announced a new contract award from the Federal Aviation Administration (FAA) following a competitive bid process.
Valued at US$59 million over five years, this contract will encompass a comprehensive range of services connected with the existing installed network of Tower Simulation Systems (TSS).
More than 21% of the world’s airspace is managed with Adacel’s Aurora ATM software. MaxSim Tower Simulator and Training systems lead the industry with the highest number of installations worldwide.
BTC announced that its wholly-owned investee company, BioImpact, has entered into an agreement granting the company exclusive rights to sell and distribute Rhythm Evolution infusion pumps in Australia and New Zealand.
Rhythm is a high-quality range of electronic, portable infusion pumps, administration sets and related accessories, for use in both hospital and homecare applications.
The pumps are Class11b reusable medical devices for the continuous, and/or bolus administration of a wide range of therapeutic medicines, including post-operative pain management, obstetrics, antibiotic therapy, oncology and immunoglobulin infusions.
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 |
|---|---|---|---|---|---|
| GWR | GWR Group | -- | Oversold | -- | -- |
| FZR | Fitzroy River | Oversold | Oversold | -- | -- |
| MLM | Metallica Minerals | -- | Oversold | -- | -- |
| KZA | Kazia Therapeutics | Oversold | Oversold | Oversold | -- |
| SKY | Sky Metals | -- | Oversold | -- | -- |
| FAU | First Au | Oversold | Oversold | -- | -- |
| IAM | Income Asset Management | -- | Oversold | -- | -- |
| KPO | Kalina Power | -- | Oversold | -- | -- |
| ABA | Auswide Bank | -- | Oversold | -- | -- |
| NRZ | NeuRizer | -- | Oversold | -- | -- |
Fitzroy holds several hard rock royalties in Australia and New Zealand.
The company says the ongoing Ukraine conflict continues to create instability in global oil and gas prices, and has the potential to impact the company’s royalty receipts.
In addition, Fitzroy says royalty receipts may be impacted by any interruption to or suspension of production from ExxonMobil & Woodside in the Gippsland Basin, and any prolonged interruption in production by Buru Energy (ASX:BRU).
Assay results for 15 of the 25 holes competed for a total of 4,759m at the Tallebung Tin Project have been received last week.
Results include:
TBRC059: 19m @ 0.27% tin from 17m, including; 5m @ 0.83% tin from 19m.
TBRC056: 10m @ 0.31% tin from 68m, including; 1m @ 0.94% tin from 69m
TBRC057: 6m @ 0.49% tin & 40g/t silver from 34m, including; 1m @ 2.30% tin & 83.8g/t silver from 35m.
Assays for the remaining 10 holes are pending and expected to be received over the coming weeks.
Gold explorer FAU recently announced that it has reached an agreement with Octava Minerals (OCT: ASX) to divest its minority interest in the Talga Project, located in the Pilbara region of WA.
The consideration is for $200k cash, 1,200,000 fully paid ordinary shares in OCT, and a Net Smelter Royalty (NSR) of 0.75%.
FAU and OCT had previously entered in a farm-in and joint-venture agreement whereby OCT could earn up to an 80% interest in the relevant tenements by spending up to $900k over a three-year period.
FAU would retain a 20% interest after expenditure commitments had been met up until the decision to mine.
FAU has agreed to sell its remaining 30% interest in the Talga project for the consideration outlined above, resulting in OCT having a 100% interest in the project.
FAU said the sale is consistent with its strategy to realise value from its non-core assets.