ChartIQ provides research tools to help you find the next Netflix or Google.
(Barron's; Mon 6/10/2013) I think it was Isaac Newton who first observed that stocks in motion tend to stay in motion. OK, it wasn't Isaac, but the principle is correct.
It has been high times for momentum investors who rely on a rising tide to lift most share prices. To the consternation of value investors, these stocks pass their 52-week highs and just keep going. Eventually, though, a genuine Newtonian concept takes over: gravity. These momentum shares keep rising past rational valuations until, suddenly, they don't.
As a result, momentum stocks demand close monitoring, a job for which ChartIQ (chartiq.com) is well suited. Unlike Web-based chart makers, this mobile app forApple iPhones and iPads and other handhelds lets you keep an eye on the fast movers anywhere all the time.
The idea is to hop off a stock once it runs out of steam, the tricky part being that prices never rise in a nice straight line. There are always dips and spikes. You don't want to stay too long at the party. But you also don't want to get faked out by market hiccups like the one caused by Fed capo di tutti capi Ben Bernanke saying he was kind of thinking about, maybe, tightening the liquidity spigot a tad some day.
ChartIQ's new Bollinger Bands feature is a good place to start getting your arms—as it were—around a stock or index price line. This overlay is similar to the channel lines technicians often draw along the uppermost and lowermost price points of a stock or index to envelop an entire trend and its trajectory. But Bollinger Bands are more precise.
Based on a trader's preference, ChartIQ will calculate the separation of the upper and lower band limits from the stock's moving average, which forms the center line. Bands are continuously updated and exactly track the jagged lines of price movements (they work with line graphs, too). They're especially handy for really volatile stocks likeNetflix (ticker: NFLX), Apple (AAPL), or Google (GOOG).
Google may well be a good long-term value. But it's definitely a momentum play, its price having rocketed 80% over 52 weeks to nearly $920 a share. The company's Silicon Valley neighbor, Apple, experienced a similar one-year rise in 2012, and was closing in on $700 a share in September. Then the script flipped, and Apple began falling as fast as it rose. It's now trading near $445. Netflix's riches-to-rags-to-riches trajectory included a $200 increase in share price over the past nine months—after a nearly identical fall in the previous 12.
Prices on the upswing tend to hover within the upper Bollinger Band; declining prices usually cluster in the lower band. The most obvious long trade is to buy when a rising stock's price dips below its moving average, or even "tags" its lower Bollinger Band, and take profits when it crosses the outer limit of its upper Bollinger Band. Rinse and repeat.
Of course, individual trades always have many more factors to consider, warns ChartIQ President Dan Schleifer. These are situations that the program's five dozen indicators and overlays can help shed light on. Besides the most popular technical indicators, ChartIQ has its own proprietary indicators that are helpful in identifying potential reversals, which can mean a trading opportunity.
Subscriptions start at $5 monthly, and ChartIQ hews to Apple's touch-and-drag usability conventions, so it's easy to build and customize charts. Every change is automatically saved and synced to your other logged-in devices. A trader on the go can quickly flip through different chart views on most smartphones and tablets.
At the very least, when applied to a market proxy like the SPDR S&P 500 ETF (SPY), a break outside either Bollinger Band warns that change is afoot—maybe even a reversal in the primary market trend. They can help you get the most out of this helium-filled market—and, hopefully, not be the last one to leave.
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