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The momentum checklist
Nine questions. If a stock cannot answer them, it does not belong on the watchlist. Print it, or work through it on screen.
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The nine questions
| # | Question | Pass condition |
|---|---|---|
| 1 | Is the stock above its 50-day moving average? | Yes |
| 2 | Is it above its 200-day moving average? | Yes |
| 3 | Is it outperforming SPY or QQQ? | Over 3 and 6 months |
| 4 | Is its sector strong? | Group is also outperforming |
| 5 | Is volume confirming? | Relative volume above 1.5 on up days |
| 6 | Is it near recent highs? | Within 15–20% of the 52-week high |
| 7 | Is it too extended? | Not far above the 10/20-day averages |
| 8 | Is there a catalyst? | Earnings, guidance, product or sector driver |
| 9 | Can risk be defined? | A logical stop exists within your ATR tolerance |
Questions 1–6 are the case for the trade. Questions 7–9 are the case against it. Most costly mistakes come from answering the first six and skipping the last three.
Educational and informational purposes only. Nothing here is financial advice, investment advice, or a recommendation to buy or sell any security. Trading and investing involve risk, including the possible loss of principal. Always do your own research and consult a licensed financial professional before making investment decisions.