The Avalanche Effect: Using Momentum To Your Advantage

Buy High… and Sell Higher

As I mentioned last week, the easiest way to find the market’s hottest stocks is to look at a list of stocks trading at 52-week highs.

Here you can find a list of Nasdaq issues at highs. And here’s a list compiled by The Wall Street Journal on the NYSE.

Before drilling down on that list, I’d like to identify the market’s strongest sectors. These sectors will likely hold the market’s most attractive momentum plays.

In the last year, the top three performers are financials (32%), technology (26%) and industrials (19%).

Now you can focus your research on stocks making new highs in the sectors with the most action.

Here’s an example…

Big Gains With This Tiny Bank

Northeast Bancorp (NBN) is the bank holding company for Northeast Bank, which operates mainly in the six New England states.

In the last year, the stock has gained 97% — outperforming the S&P SmallCap 600 Financials Index (26%) by nearly four times.

In other words, this stock is rocketing up the chart with significant force behind it and leaving its peers in the dust.

Despite the sharp rise in shares, the company sports a market capitalization of less than $200 million, leaving plenty of room to grow.

From a technical perspective, the stock is in an uptrend, well supported by its rising 50-day moving average. In fact, NBN hasn’t closed below its 200-day moving average since last June.

And a quick look at NBN’s fundamentals proves just as promising…