When it comes to short-term investing and trading, they say that “the trend is your friend.” And there’s no denying that this is the most profitable strategy. However, identifying the continuity of a trend and profiting from it is easier said than done.
Often times, after investing in a stock, the stock price movement quickly reverses, causing investors to suffer short-term capital losses. That’s why it’s important to make sure there are enough factors that can keep the stock’s momentum going, such as sound fundamentals, positive earnings estimate revisions, etc.
Investors looking to profit from stocks currently moving in value will find our “Recent Price Strength” screen extremely useful. This predefined screen helps find stocks that are trending upwards, supported by strong fundamentals, and trading at the upper end of their 52-week high and low ranges, which is usually a bullish indicator.
Bay Commercial Bank (NASDAQ:BCML) is one of several suitable candidates that made it through the screen, and here are the main reasons why this could be a profitable investment for “trend” investors:
The robust share price growth over 12 weeks reflects investors’ continued willingness to pay premium for the upside potential of shares, and BCML has been a great fit in this regard, rising 19.1% over the period.
However, looking at price fluctuations over a three-month period or so is not enough, as it does not reflect trend reversals that may have occurred over a shorter period of time. Maintaining the price trend is important for potential winners. The 26.4% price increase over the past four weeks indicates that the trend for this company’s shares is still continuing.
Moreover, BCML is currently trading at 94.4% of its 52-week high-low range, suggesting it may be on the brink of a breakout.
Looking at the fundamentals, the stock currently has a Zacks Rank #2 (Buy), which means it is in the top 20% of more than 4,000 stocks ranked based on earnings estimate revisions and EPS surprise trends — key factors influencing a stock’s near-term price movement.
The Zacks Rank stock rating system uses four earnings estimate-related factors to categorize stocks into five groupings, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell). This system has a proven, outside-audited track record of outperformance, and since 1988, Zacks Rank #1 stocks have generated an average annual return of +25%.
Another factor supporting the company’s fundamental strength is the average broker recommendation rating of #1 (Strong Buy), which indicates that the brokerage community is highly optimistic about the stock’s short-term price movement.
Therefore, BCML’s price trend is likely not to reverse anytime soon.
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