Yahoo Finance Shares in Naked Wines outperform over three months
Shares in Naked Wines (LON:WINE) have outperformed the market over the past three months, signalling optimism on the part of investors at a time of economic uncertainty.
Based on relative price strength against the market, the company's shares are up by 68.0% over the past three months. They are currently trading at 396.87p.
That performance comes after a turbulent period for the UK's main indices. Shares sold off heavily in March over fears about the impact of Coronavirus. Markets have trended higher since, but the earnings outlook is deeply uncertain as companies wrestle with the fallout from the economic shutdown.
The good news for Naked Wines is that positive recent price momentum is seen by industry experts as a leading predictor of continued strength...
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Trading the trend
Research by strategists like James O'Shaughnessy, William O'Neil and Charles Kirkpatrick shows that relative strength can be one of the most consistently useful pointers to growth.
Price momentum is heavily influenced by psychology, with investors under-reacting and subsequently over-reacting to company news, driving prices higher over time.
The catch is that investor sentiment is prone to wild swings, which makes momentum risky when used on its own. Combining it with other factors, like attractive valuation, high quality and low volatility, can help reduce that risk.
Overall, the upward trend in the share price of Naked Wines over the past three months is a promising sign. But while the stock has been outperforming recently, relying on momentum in volatile markets can be hazardous.
Is it time to buy or sell?
Shares in Naked Wines (LON:WINE) have outperformed the market over the past three months - but is that justified? Investors may be optimistic about the future, but economic uncertainty still dominates.
To get a better understanding, it's worth looking at whether the shares are now cheap or expensive, and whether analysts have now changed their forecasts. You can find that out with the company's Stock Report on Stockopedia.
