Come rain or shine, everyday the last thing I do in my daily market analysis routine is to run a scan for stocks up 25% plus in a month. I run the scan, boil myself a pot of tea and systematically study each of them. I want to know:

1.  what makes a stock go up 25% plus in a month. 
2. How does it start the move
3. What are the volume patterns during the move
4. What are the price patterns during the move
5. What was its momentum ranking before the move started
6. How did its momentum ranking progress during the move
7. What kind of pullback did it have
8. In how many days did it make 25% plus move
9. What is its float
10. What was its dollar volume at breakout
11. What was its p/e, p/s, roi, margin, p/b, peg, debt to equity, 
12. What was their eps growth
13. What was their sales growth
14. What was their IBD ranking
15. How far are they from 52 week high or low
16. What was its price trend for last 1, 3, 5 years
17. What was their sector relative strength
18. What was their short interest
19. What was the insider buying trend
20. What was the trend intensity readings at breakout
21. How did the trend intensity readings progressed
22. What was the news on the stock for last one month
23. How far is this stock from last earnings or upcoming earnings
24. When did the stock IPO
25. 25 What is its fund holding trend

and so on. 

 

All this information is publicly available freely. The tools I use to do this analysis are:

1. Finviz
2. Moneycentral
3. Google Finance
4. Dailygraphs
5. Investor.com

On most days there are not many stocks meeting this condition so it takes 15 minutes to do it. Once in a while you get 200 plus stocks, then it takes a hour to do this.

 

The objective is clear to develop a model of stocks that make big move in short period of time and try and capture couple of moves in a year. The understanding from the exercise goes in to building better scanning criteria and validating or invalidating commonly touted trading wisdom or beliefs.

 

You will find answer to questions like :

1. does significant earnings surprise move stock
2. does nearness to 52 week high matter
3. should you focus on high priced or low priced stocks
4. should you focus on high daily average volume stocks or low daily average volume stocks
5. does IBD eps ratings matter
6. does float matter
7. what period relative strength/momentum  is best 
8. why prior period gains are most critical to picking winners

While it is difficult to generalize things because every phase of market has different kind of stocks making 25% plus moves, there are certain common themes you can find and the common themes in terms of factors that drive a stock to make 25% plus move in a month are:

1. Prior neglect
2. Catalyst. Big moves start with some catalyst.
3. Sector momentum is best predictor of short term probability of a stock making a big move
4. Price momentum is next most important criteria
5. Float, low price, low dollar volume prior to breakout are good

Rest of the factor really do not matter. In the short run fundamental factors do not matter. Immediate catalyst and sector momentum is most critical factors on a month time frame. 

 

How can you use this information in day to day trading. Focus on stocks with high sector momentum or sector catalyst (Bluefin Sector+price momentum and Emerging Opportunities scans). Focus on stock with immediate catalyst (Episodic Pivots). All things being equal low priced, low dollar volume and low float stocks tend to make biggest move.

 

But above all almost every move of 25% plus in magnitude in a month starts with a 4% breakout signal. Now how valuable is that information to you if you know how to exploit it....