Ever since the 1980s, when the now-infamous "Turtle Traders" beat the market with simple strategies based on breakouts to new high prices, momentum investing has been shown to be a very profitable strategy.
In fact, many academics now agree that ‘momentum’ is one of the most powerful drivers of returns in financial assets’.
With this in mind, shares in Afterpay (ASX:APT) have been in an uptrend in recent months, showing strong price momentum. The question now for investors is whether that price strength will continue.
Knowing exactly what drives relative strength in share prices can help you find profitable momentum trades.
How has the Afterpay (ASX:APT) share price performed?
Afterpay operates in the Business Support Services industry and in terms of relative price strength the stock has performed well against the market over the past year:
- 1 Month: 48.6%
- 6 Months: 85.7%
- 12 Months: 113.5%
Relative strength is a useful tool in the armoury of technical traders and investors. It’s an instant measure of how a stock has performed in comparison with a benchmark.
And while there are no certainties about which way a stock will move next, research shows that price trends like this often persist.
Studies by leading experts on momentum show that stocks with the strongest price strength tend to keep up the pace for anywhere up to one year as investors increasingly buy in to them.
Afterpay is currently among the stocks with the strongest six-month and one-year relative price strength in the market. A look at its StockReport could offer more insight into what’s driving the momentum in its share price - and whether that might continue.
To find more stocks like Afterpay, you'll need to equip yourself with professional-grade data and screening tools. This kind of information has traditionally been closely guarded by professional fund managers. But our team of financial analysts have carefully constructed this screen - Stockopedia’s Price Momentum - which gives you everything you need. So why not come and take a look?