When it comes to short-term investing or trading, the saying “the trend is your friend” rings true. This strategy often leads to significant profits. However, identifying sustainable trends that will yield positive returns can be a challenge. Trends frequently reverse before investors can exit their positions, resulting in short-term capital losses. To maximize profitability, investors should carefully analyze various factors, such as strong fundamentals, positive earnings estimate revisions, and other indicators that support the stock’s momentum.
Our “Recent Price Strength” screen, developed based on a unique short-term trading strategy, can be incredibly helpful in this regard. This pre-defined screen efficiently identifies stocks with sufficient fundamental strength to maintain their recent uptrend. The screen only selects stocks trading in the upper portion of their 52-week high-low range, which is a strong signal of bullish sentiment.
Several stocks have passed through this screen, including UniCredit S.p.A. Unsponsored ADR (UNCRY). Let’s delve into the reasons why this stock stands out as a solid choice for “trend” investing.
A robust price increase over a 12-week period reflects investors’ sustained confidence in the stock’s potential upside. UNCRY aligns perfectly with this characteristic, having gained 11.5% over this period. However, simply looking at the price change over three months is insufficient, as it might not capture potential trend reversals that could occur within shorter timeframes. For a stock to be considered a potential winner, maintaining the price trend is crucial. UNCRY’s 1.5% price increase over the past four weeks confirms that the trend remains intact for this company. Furthermore, UNCRY is currently trading at 91.1% of its 52-week high-low range, suggesting that it could be on the verge of a breakout.
Examining the fundamentals, the stock currently holds a Zacks Rank #2 (Buy), indicating its placement within the top 20% of over 4,000 stocks ranked based on trends in earnings estimate revisions and EPS surprises – the key factors driving a stock’s near-term price movements. The Zacks Rank stock-rating system, which categorizes stocks into five groups ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell) based on four earnings estimate-related factors, boasts an impressive externally-audited track record. Stocks ranked #1 have consistently generated an average annual return of +25% since 1988.
Another factor confirming the company’s fundamental strength is its Average Broker Recommendation of #1 (Strong Buy). This signifies the brokerage community’s strong optimism regarding the stock’s near-term price performance. Based on these factors, the price trend in UNCRY is unlikely to reverse in the near future.
