In momentum trading, traders pick the strong stocks to go long and weak stocks to go short. However the key question here is how do you determine if a stock is a strong stock or a weak stock?
You can derive some basic information based on the list. For example, the Utilities sector is not doing well whereas Technology sector has more strong stocks.
You should be able to tell from the price chart if a stock is looking strong. For example if a stock keeps making higher low and higher high, it falls into the strong stock category. By the same token, if the stock is making lower high and lower low, it is considered a weak stock.
A more mathematical method is to compute the distance between the current closing price and its 52 week’s price high and price low to determine which is the stronger and weaker stock trading in the market.
The formula is as follows:
Strength = (52 week high – closing price)/52 week high
Weakness = (closing price – 52 week low)/52 week low
If you compute the Strength and Weakness value for every stock trading in the exchange and sort it based on its Strength and Weakness, you get a list of strong and weak stocks respectively.
Based on the 7 Dec 2010 closing price of the 500 stocks in the S&P500 index, the list of strong stocks is:
Symbol | Strength | Close | Sector | Industry |
---|---|---|---|---|
CVX | 0.003809237 | 86.30000305 | Basic materials | Major integrated oil and gas |
IFF | 0.005945979 | 55.16999817 | Basic materials | Specialty chemicals |
PX | 0.008431655 | 94.08000183 | Basic materials | Synthetics |
PPG | 0.006667501 | 80.44999695 | Conglomerates | Conglomerates |
HRL | 0.003592821 | 49.91999817 | Consumer goods | Meat products |
MKC | 0.008097189 | 46.54999924 | Consumer goods | Processed and packaged goods |
CCE | 0.008907806 | 25.59000015 | Consumer goods | Beverages - soft drinks |
XRX | 0.009189692 | 11.85999966 | Consumer goods | Business equipment |
AMP | 0.006901581 | 54.68000031 | Financial | Asset management |
AON | 0.007722011 | 43.68999863 | Financial | Insurance brokers |
MMC | 0.008971954 | 26.51000023 | Financial | Insurance brokers |
TMK | 0.009245737 | 61.08000183 | Financial | Life insurance |
BIIB | 0.002971281 | 67.11000061 | Healthcare | Biotech |
KG | 0.004210556 | 14.18999958 | Healthcare | Drug manfacturers - others |
BDX | 0.005985165 | 81.37999725 | Healthcare | Medical instruments and supplies |
ROP | 0.002734462 | 76.58999634 | Industrial goods | Industrial equipment and components |
PLL | 0.007170708 | 48.45999908 | Industrial goods | Diversified machinery |
SNA | 0.007656701 | 55.72999954 | Industrial goods | Small tools and accessories |
ROK | 0.008409406 | 69.56999969 | Industrial goods | Industrial electrical equipment |
FISV | 0.001701587 | 58.66999817 | Services | Business services |
CHRW | 0.004169377 | 76.43000031 | Services | Air delivery and freight services |
COST | 0.005994836 | 69.63999939 | Services | Discount variety stores |
EXPD | 0.006355943 | 56.27999878 | Services | Air delivery and freight services |
MCD | 0.007412974 | 80.33999634 | Services | Restaurants |
ESRX | 0.008229714 | 54.22999954 | Services | Management services |
AKAM | 0.004964156 | 54.11999893 | Technology | Internet information providers |
ADI | 0.006820523 | 37.86000061 | Technology | Semiconductor - integrated circuits |
TXN | 0.006837085 | 33.40999985 | Technology | Semiconductor - broad line |
CPWR | 0.007023698 | 11.31000042 | Technology | Application software |
A | 0.007919726 | 37.58000183 | Technology | Scientific and technical instruments |
The list of weak stocks is:
Symbol | Weakness | Close | Sector | Industry |
---|---|---|---|---|
EOG | 0.08708655 | 92.70999908 | Basic materials | Independent oil and gas |
CLX | 0.080508095 | 62.18000031 | Conglomerates | Conglomerates |
DF | 0.036465603 | 7.389999866 | Consumer goods | Dairy products |
K | 0.051353151 | 48.90999985 | Consumer goods | Processed and packaged goods |
CAG | 0.057359735 | 22.01000023 | Consumer goods | Processed and packaged goods |
GIS | 0.066244774 | 35.04000092 | Consumer goods | Processed and packaged goods |
CL | 0.076454904 | 78.16999817 | Consumer goods | Personal products |
CPB | 0.079652261 | 33.90000153 | Consumer goods | Processed and packaged goods |
BAC | 0.061467899 | 11.56999969 | Financial | Regional - Mid atlantic banks |
HCBK | 0.069451875 | 11.97999954 | Financial | Savings and loans |
PBCT | 0.070491854 | 13.06000042 | Financial | Savings and loans |
FHN | 0.082618078 | 10.09000015 | Financial | Regional - Southeast banks |
AMGN | 0.057103121 | 53.13000107 | Healthcare | Biotechnology |
ISRG | 0.059337495 | 260.6499939 | Healthcare | Medical appliances and equipment |
ABT | 0.060284018 | 46.88999939 | Healthcare | Drug manufacturers - major |
THC | 0.076530538 | 4.21999979 | Healthcare | Hospitals |
ZMH | 0.086449102 | 50.27000046 | Healthcare | Medical appliances and equipment |
LLY | 0.09435657 | 34.11000061 | Healthcare | Drug manufacturers - major |
LMT | 0.037046919 | 69.44999695 | Industrial goods | Aerospace/Defense products and services |
PHM | 0.083197348 | 6.639999866 | Industrial goods | Residential construction |
BIG | 0.002465646 | 28.45999908 | Services | Discount variety stores |
SVU | 0.015853673 | 8.329999924 | Services | Grocery stores |
SAI | 0.067249496 | 15.86999989 | Services | Technical services |
RSH | 0.084268381 | 18.94000053 | Services | Electronics stores |
KR | 0.093890482 | 20.68000031 | Services | Grocery stores |
CSCO | 0.020526284 | 19.38999939 | Technology | Networking and communication devices |
NRG | 0 | 18.85000038 | Utilities | Electric Utilities |
CEG | 0.011255981 | 28.29999924 | Utilities | Electric Utilities |
ETR | 0.022687719 | 70.41000366 | Utilities | Electric Utilities |
FE | 0.090864527 | 35.56000137 | Utilities | Electric Utilities |
You can derive some basic information based on the list. For example, the Utilities sector is not doing well whereas Technology sector has more strong stocks.
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