KEY
TAKEAWAYS
- Absolute momentum defines development course.
- Relative momentum quantifies the energy of the uptrend.
- Take collectively, these two kind the idea for a Twin Momentum Rotation Technique.
Because the title suggests, Twin Momentum Rotation Methods concentrate on shares which might be in absolute and relative uptrends. This can be a two-step course of. First, filter out shares which might be in long-term downtrends and solely concentrate on shares in uptrend. Second, rank the shares by a efficiency indicator and concentrate on the strongest. Word that TrendInvestorPro runs two Twin Momentum Rotation Methods.
Conventional trend-following indicators, such because the 200-day SMA, measure absolute momentum. For instance, a inventory is in a long-term uptrend when above its 200-day SMA. Shares buying and selling under their 200-day SMAs are in long-term downtrends and don’t make the minimize for the second step.
For shares in long-term uptrends, chartists can then quantify efficiency utilizing the 200-day Charge-of-Change and evaluating values to search out the strongest. A inventory with a 49% Charge-of-Change is stronger than a inventory with a 19% Charge-of-Change.
The picture under reveals CandleGlance charts for the highest Nasdaq 100 shares. They’re ranked by the 200-day Charge-of-Change (ROC(200)). “Add indicator” is Charge-of-Change 200 and “Type by Indicator” is Descending (crimson define). These 12 are additionally above their 200-day SMAs (crimson traces) and in long-term uptrends.
Because the inexperienced ovals present, Nvidia (NVDA), Crowdstrike (CRWD) and Constellation (CEG) are up over 100% the final 200 days and the opposite 9 are up 50% or extra. Chartists operating a Twin Momentum Rotation Technique can be centered on these main names when establishing a portfolio. Energy begets energy.
We use the same course of for our Twin Momentum Rotation Methods at TrendInvestorPro. As an alternative of uncooked Charge-of-Change, we use a volatility-adjust model to degree the enjoying subject. NVDA, CRWD and CEG are half of the present portfolio for the Nasdaq 100 technique. We even have a separate technique for S&P 500 shares. Each methods are off to an ideal begin this yr and you may view full efficiency metrics right here.
///////////////////////////////////
Select a Technique, Develop a Plan and Observe a Course of
Arthur Hill, CMT
Chief Technical Strategist, TrendInvestorPro.com
Writer, Outline the Pattern and Commerce the Pattern
Need to keep updated with Arthur’s newest market insights?
– Observe @ArthurHill on Twitter
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic method of figuring out development, discovering alerts throughout the development, and setting key worth ranges has made him an esteemed market technician. Arthur has written articles for quite a few monetary publications together with Barrons and Shares & Commodities Journal. Along with his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Enterprise College at Metropolis College in London.
