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How To Find Stocks That Will Soar For A Very Long Time
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If you can flash back to basic physics classes without opening traumatic wounds, you will remember the three laws of motion. They apply to market and stock trends just as much as they do in the physical world.
Rumors, stories, or dozens of other sources can create momentum by causing buying pressure to overwhelm sellers and drive a higher stock price.
We see it all the time in small stocks, especially clinical-stage biotechs.
A story begins to circulate about cancer-killing drugs or treatments that allow one to maintain a diet of bonbons, donuts, and double bacon cheeseburgers, as well as chain-smoking two packs a day but live forever.
When the story proves to be untrue, traders dump the stock, buyers disappear, and the price collapses.
That is not to say that price momentum is unimportant or not a wildly profitable strategy for buying stocks.
It very much is, and almost all the biggest winners in stock market history had powerful momentum.
However, that momentum did not result from stories, rumors, manipulation, or other forces with no staying power.
There's a new feature at Benzinga that allows you to get stock picks and new trades straight from our top experts. This includes the two Wall Street veteran traders.