Ben Hobson | Nov 18, 2020 09:40
Studies by leading experts into the power of price momentum show that stocks with the strongest price trends can potentially keep up the pace for anywhere up to one year. A big part of the reason for this is down to investor psychology.
With that in mind, shares in Ao World (LON:AO) have been in an uptrend in recent months, and the question now for investors is whether that price strength will continue.
Knowing exactly what drives relative strength in share prices can help you find profitable trades based on momentum – but does Ao World fit the bill?
h2 Ao World's performance to date/h2In terms of relative price strength the stock has performed well against the market over the past year:
Relative strength is a useful tool in the armoury of technical traders and investors. It’s an instant measure of how a stock has performed in comparison with a benchmark.
And while there are no certainties about which way a stock will move next, research shows that price trends often persist. Why is this? Studies broadly show it is down to:
In both cases, stocks with positive price momentum often see their prices trend higher.
Ao World is currently among the stocks with the strongest six-month and one-year relative price strength in the market. But momentum on its own is no guarantee of future returns.
To get a better idea about whether this momentum will continue, it's worth doing some investigation yourself. Indeed, we've identified some areas of concern with Ao World that you can find out about here.
Alternatively, if you'd like to find more shares with strong price momentum, you can find them on this Positive Momentum screen.
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