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Where next for the Avon Rubber (LON:AVON) share price?

Ben Hobson

Shares in Avon Rubber (LON:AVON) have been in an uptrend in recent months, and the question now for investors is whether that price strength will continue.

Finding stocks with the potential to break-out as their popularity grows is a strategy used by some of the world’s most successful traders.

Knowing exactly what drives relative strength in share prices can help you find profitable momentum trades. I’m going to use Avon Rubber as an example of how this can work.

GET MORE DATA-DRIVEN INSIGHTS INTO LON:AVON »

How has the Avon Rubber (LON:AVON) share price performed?

Avon Rubber is a balanced, mid cap in the Industrial Machinery & Equipment industry and it has a market cap of £534.8m.

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In terms of relative price strength against the FTSE All-Share index, shares in Avon Rubber are up by 36.6% over six months and up by 26.4% over one year.

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 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. A big part of the reason for this is down to investor behaviour. In particular, it's caused by:

  • Under-reaction - prices are slow to move up because investors are hesitant to bid prices higher in stocks that have already been on a strong run.

  • Delayed over-reaction - investors chasing rising prices attract the attention of other investors, who follow them into those trades, pushing prices higher and higher.

In both cases, stocks with positive price momentum often see their prices trend higher.

Next steps

Avon Rubber 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 Avon Rubber, 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?