When it comes to short-term investing and trading, “trends are your friend,” but timing your entry into a trend is key to success. And increasing your chances of success by ensuring the sustainability of a trend is no easy task.
Often times, trends will reverse before a trade can be closed, leading to short-term capital losses for investors. Therefore, to make profitable trades, you need to look for factors that can sustain the stock’s momentum, such as sound fundamentals, positive earnings estimate revisions, etc.
Our “Recent Price Strength” screen, created based on a unique short-term trading strategy, can be extremely helpful in this regard. This predefined screen makes it very easy to narrow down stocks that have enough fundamental strength to sustain their recent uptrend. The screen also only passes stocks that are trading at the upper end of their 52-week high and low ranges, which is usually a bullish indicator.
Several strains passed the screen; Hitachi, Ltd. (OTC:HTHIY) is one of them, and here are the main reasons why this stock is a solid choice for “trend” investing:
The robust share price gains over 12 weeks reflect investors’ continued willingness to pay high prices for the stock’s upside potential, and HTHIY has been a great fit in this regard, up 13.1% over the period.
However, looking at the price movement over a three-month period or so is not enough, as it does not reflect any trend reversals that may have occurred over a shorter period. Maintaining the price trend is important for potential winners. The 7.3% price increase over the past four weeks indicates that the trend for this company’s shares is still continuing.
Additionally, HTHIY is currently trading at 95.2% of its 52-week high-low range, suggesting it may be on the brink of a breakout.
Looking at the fundamentals, the stock currently sports a Zacks Rank #1 (Strong Buy), which means it is in the top 5% 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, HTHIY’s price trend may not reverse anytime soon.
In addition to HTHIY, there are several other stocks currently passing our “recent price strength” screen, and you can consider investing in these stocks and begin looking for newer stocks that fit these criteria.
This isn’t the only screen that can help you pick your next promising stock.
But remember, the key to a successful stock-picking strategy is making sure it has generated profits in the past.
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