Momentum tends to last longer and go further than seems reasonable. We have a good illustration of that right now as the market completely ignores the political drama in Washington, the Covid crisis, and any other negative news you can throw at it.
All of the major indices are now at all-time highs, and breadth is running very strongly at 5300 gainers to 2000 decliners. Almost 1000 stocks are hitting new 12-month highs, and the list of big movers is too long to count.
Sectors like solar energy, banks, electric vehicles, and bitcoin (GBTC) continue to lead the charge, but traders are digging deep to find the next big mover.
The big dilemma in this sort of action is to what degree you take profits when you catch a big move. A good example is RenaSola (SOL) , which I've discussed quite a bit in the last couple of weeks. The stock is approaching a 300% move since it was my Stock of the Week and shows no signs of slowing.
Typically, the way I handle this sort of action is to take some partial profits along the way and try to keep a core position, but the problem is that the core position grows smaller as the stock becomes more and more extended. It is an excellent problem to have, but it is frustrating as there is no easy way to guess how far the momentum will run.
I'm trying to find a way to put more cash to work, but it is becoming increasingly difficult as entry points become harder every day.
One name I just added to is Canaan (CAN) , a China-based company involved in the design of bitcoin mining machines incorporating integrated circuit technology. It is correlated with the price movement of bitcoin, and the chart is developing well.
I'll keep looking for more setups, but they are hard to find. However, that doesn't mean that I'm going to sell what I'm holding.