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Strategies & Market Trends : Momentum Daytrading - Tricks of the Trade
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To: Joseph Stratmann who wrote (2045)12/30/1999 8:23:00 PM
From: Ken Wolff  Read Replies (1) of 2120
 
Hi Joe,

A stock's momentum is very much like the momentum of a bouncing rubber ball. As the ball is released, it hits the floor and bounces up. It then climbs to reach its first and greatest height. It will never again reach this height unless it is hit with an added external force. The residual oscillations, following this initial bounce, then subside and diminish gradually in strength. The oscillations become narrower until they are small and the ball finally falls flat.

Consider the cause for momentum as the height from which the ball is dropped. At market open, the strength of a stock is at its peek. The cause for momentum, be it news or other, is at that time fresh. Reactions to the cause are at that time the strongest. Shortly after market open, a stock will make its first high and its first low. The difference between this high and low is a stock's range. These highs and lows are generally the highs and lows of the day unless the stock or market is hit with new force.

After a stock reaches its first bottom and top, we use that range as a gauge for seeing the potential of residual oscillations. We have no reason to believe that a stock will make a new high or low.

Hope that helps,

Ken Wolff
www.mtrader.com
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