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Contents
Introduction 2
Section 1:The Mental Aspect 4
Section 2: Getting the Most Out of the Momentum Trader 5
Section 3: Follow the Leader 6
Section 4: How to Read Momentum TraderAlerts 7
Section 5: How to Read Momentum Trader Daily Summary 9
Section 6: Virtues of Money Management 10
Section 7: Tying it All Together 11
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Introduction:
Mo-men-tum [moh-men-tuhm] n.
force or speed of movement; impe-tus, as of a physical object or course
of eventsIn the world of stock trading when someone says momentum we think price momentum.
A momentum stock is the sexy stock that everyone wants to talk about. Its the TSLA, its
the NFLX, its the PCLN. Its the stock that just seems to keep on rising no matter what
because it has the momentum of buyers piling into it, driving the stock price higher.
What we are looking for here is more than simply stock price momentum, because I look
at stock price as the end result. Its the end result of buyers and sellers agreeing on a
price for the stock and, in the case of a momentum stock, agreeing on a higher and high-
er price. Looking at price only when on the hunt for stock ideas is like looking in your re-
view mirror for the fastest car. By the time you realize which one is the fastest, its zipping
by you.
The question is, how can we use the Zacks Rank and other tools we have at our disposal
here to uncover stocks with other types of momentum other than just price momentum?
Stocks that have earnings surprise momentum, earnings momentum, price momentum,and breakout momentum.
Remember the earnings surprise portion of the Zacks Rank. It states that companies
which have had earnings surprises in the past are more likely to have earnings surpris-
es in the future. You can equate continued earnings surprises to a stock having earnings
surprise momentum.
There have been several studies that suggest stocks that have just hit 52 week highs are
likely to make higher highs. I call this breakout momentum. Stocks that break through ar-
eas of resistance are more likely to break through further levels of resistance than stocksthat havent broken through resistance. Already weve managed to stumble into a great
momentum screen without getting too detailed and most importantly, putting theory first.
Putting all our price and earnings indicators together gives us a pretty good starting point.
Weve managed to funnel down the 880 stocks that carry a Zacks Rank #1 (Strong Buy)
and Zacks Rank #2 (Buy) and sift out about 40 or so of these stocks that have four types
of momentum. Theres one part of this puzzle that is missing. Exactly when is the right
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time to buy these stocks and which ones exactly to buy? Thats where the technical anal-
ysis side of the equation comes in.
Remember, the screen we ran to find these stocks looked for stocks close to their 52
week highs so we are going to see a few that have seemingly run away from us. Im not
interested in chasing the last 5% of a big move; Im more interested in picking up thesestocks as they pull back to, or at least near a support level.
So the first scrubbing Im going to do is separating these stocks by the distance to their
support by comparing them to various moving averages. That leaves me with a short list
of stocks with great charts that havent taken off through the stratosphere already. Then
I use short term triggers that tell me exactly when is the right time to enter the trade, but
more importantly in my eyes, when to get out of a trade.
Keep in mind the Zacks Rank #1 track record of 26% per year since 1988. What if we
were to find the best 7 or 8 of the 220 Zacks Rank #1 stocks out there? What would those
results look like?
Welcome to the most explosive investment formula in the world.
Welcome to Momentum Trader.
David Bartosiak
Stock Strategist- Zacks.com
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Section 1:
The Mental AspectIt is important to realize how much investment success is related to what goes on between
your ears. There are so many ways to get distracted and to question yourself while trad-
ing. You must be in the right frame of mind and have reasonable expectations to achieve
success with this or any investment service. So be sure to pay attention to the tips in this
section carefully; they will get you headed in the right direction.
NOBODY IS 100% PERFECT
First of all, there will be losing picks, but if we cut them out early to minimize losses and
maximize gains on winners, then we can achieve phenomenal results.
A little known fact is that the Zacks Rank, even with its 26% annual return, is only right56% of the time. We are extremely confident that over time we will produce substantial re-
turns, but it is important that you learn to take the losing picks in stride.
COMPOUND YOUR RETURNS
The Momentum Traderuses a system that identifies momentum stocks that have pulled
back to support to achieve its vast outperformance. We let these stocks run when they
start to move higher again. However, while there will be some big winners, it is having
consistent smaller gains that will really add up over time.
This is what we call the beauty of compounding and how it works to an investors advan-
tage. Albert Einstein is said to have called compound interest the eighth wonder of the
world and this is a prime example. So dont get discouraged when you are only see-
ing small gains on each respective trade, because that is exactly what this product is de-
signed to do.
TIMELINESS INCREASES ROI
Let me ask you a question. Would you rather make 10% or 20% on a trade?
Yes, its a trick question. The missing piece of the puzzle is how long each trade was held.So now lets say that the 10% gain was made in 3 months time, which computes to a 46%
annual return. On the other hand, the 20% winner took 2 years to achieve and is really
only good for a 10% annual gain.
This example solidifies the power of timely stock trading that we will harness with this ser-
vice. Most often we will only be holding on for a few months and stringing together a se-
ries of smaller winners. But from time to time we let winners run longer.
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DONT CHERRY PICK
You should only subscribe to this service if you intend to fully investigate and act upon
these opportunities. The best results from this service can be obtained by following every
recommendation, with properly proportioned amounts invested in each selection. Picking
and choosing among the selections is rarely successful and is a leading cause of dissat-
isfaction amongst subscribers.
Section 2:
Getting the Most
Out ofMomentum Trader
It is our job to provide you with timely and profitable stock picks, but there are steps thatyou can take to ensure your success with Momentum Trader. Here are a few things you
can do to get the most out of the product.
1. Read this guide carefully
This guide is your friend. It has valuable information on how to use the product
and succeed with the assistance of Momentum Trader.
It gives you step-by-step instructions on how to receive alerts and what to do
when you receive them.
It has important money management tips.
2. Have a working email address
This is necessary to receive trading alerts. Make sure you can access your
email in a timely fashion because acting on trades is essential to success.
The Daily Summary email will be sent at 8:00 p.m. EST, which summarizes the
positions as well as what happened on Wall Street during that trading day.
Intra-day trading alerts, while rare, will typically be sent within the first hours of
the trading day.
Unfortunately, many Internet service providers have software programs that fil-
ter out emails you want to receive, like Zacks Momentum TraderDaily Summa-
ries. To get optimal delivery of our emails follow this linkfor quick and easy in-
structions.
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3. Have an online trading account
We are not advocating any particular company for this, but ideally lower com-
missions will help you achieve a higher overall return. You will make several
trades a month, and high commissions can really eat into your profit margin,
especially if you have limited capital.
4. Access the site
To access the site, go to http://www.zacks.com/momentumtrader and enter
your username and password. This will take you to the main page where you
can view the portfolio, any pending trades, and the commentary.
Section 3:
Follow the LeaderWith Momentum Trader, it is better not to pick and choose among the recommendations.
We suggest that you follow each and every one of the picks to achieve overall success.
The process to receive our trades is very simple, yet we feel it is so important that we are
going to spell it out for you. Here are the four steps.
Here are the four steps:
Receive the email with the daily summary or intra-day signal.
Read the email to determine appropriate action.
Place trades through your broker with the appropriate % allotted.
Follow the daily summaries to determine when to sell.
Subscribers who realize the highest returns follow all of the recommendations, and those
who do the worst try and cherry pick which buy signals to act on and which to pass on.
Follow the signals and youll maximize your opportunity for success.
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ACT PROMPTLY = MOST SUCCESS
And if you dont beat the market, you can take advantage of our 100% Money Back Guar-
antee.
SPEAKING OF THE GUARANTEE..........
We feel that if we are not able to live up to our word and help you beat the market then we
shouldnt be deemed worthy enough to take your money. So in addition to the 90-day, no
hassle guarantee, there is a 100% Money Back Performance Guarantee.
There are a few conditions that have to be met first, but the bottom line is that we have to
perform. Click here for details.
Section 4:
How to Read Momentum Trader
AlertsFrom time to time, this strategy will have a trading alert during the trading day. When a
Buy Alert or Sell Alert is sent out, you should receive the alert within the first hours of the
trading day detailing what stock is being added or sold and the rationale behind the move.
It is important that you act as soon as you can. Here is an example:
Signal = The type of alert. It will be a green ball to initiate a position or a red ball to close
a position.
Company Name= The name of the company that is being added to or sold from the Mo-
mentum Traderportfolio.
Symbol= Ticker symbol of stock being added to or deleted from the portfolio.
Date Added= The date on which the stock was added to the portfolio.
Mkt Val %= The percentage of your allotted portfolio to allocate to this position
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Momentum Trader Portfolio Commentary= As part of the alert, David will explain his
rationale for the addition. You will learn her reasoning for adding or selling the stock and
the current price at which the stock is trading.
Intraday alerts use the average of the price at the time of the alert and the closing price
that day.
Recommendations that use stops or limits will use that price for performance figures.
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Section 5:
How to Read the Momentum Trader
Daily SummaryThe Daily Summary provides a wide array of details for Momentum Trader each trading day.
This summary may have new signals as well as the current open portfolio with daily com-
mentary. The % allocation for each stock is also shown. This is valuable information as it
conveys what our game plan is, why we are in each stock, when to get out and why, as well
as any relevant news. This is emailed to you at 8:00 p.m. EST. In regards to the price add-
ed/deleted for the portfolio, Zacks uses the average of the price at the open and the closing
price on the day the stock is added or deleted.
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Section 6:
Virtues of Money ManagementMoney management can be the difference between realizing large gains and going broke,
even if the winning percentage is the same. How can this be? The key point is that win-
ning investors know to ride their winners and cut their losses quickly, and to stick with a
plan that has proven to work in the past.
Here are a few rules that you can follow to further improve your returns:
First of all, dont dump your entire portfolio into these Momentum Trader picks. Only allo-
cate that portion of your capital that can be comfortably devoted to speculation.
This portfolio will typically hold around 7 positions. You should be able to sleep soundly
and act rationally if you are only trading with your speculative money.
Keep in mind that reinvesting profits and the power of compounding are your friends in
this portfolio. Those frequent singles add up to large gains in the end when the phenom-
enon of compound interest works its magic.
EVER-PRESENT CLICH RINGS TRUE
The Momentum Traderis a great service, no doubt. It has been said millions of times be-
fore, but it is so important it needs to be said again: Dont put all your eggs in one basket.
Even if you are the most brilliant investor in the world, there will be losing trades. The keyis staying in the game and building your equity over time in a systematic way. This can
only be done when diversification is put to use.
Not that we have to remind you, but the main point is that your capital was earned through
years and years of hard work. Capital conservation sounds boring, but without it, you are
fighting a losing battle. We dont want to see the money you have put your blood, sweat,
and tears into evaporate due to lack of discipline.
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Section 7:
Tying it All TogetherIt is our goal at Zacks to enhance your trading results via the Momentum Traderservice.
This booklet touches upon the details of the service and provides several useful tips to
realize the vast potential that Momentum Tradercan yield. We feel it is our job to let you
know that we are here to help you get the most out of Momentum Trader.
Again, lets go over some of the important points made in this booklet.
Follow Every Single Trade
Small Gains Add Up To Big Results
Not Every Trade Will Be A Winner
Timeliness Is Of The Essence
Money Management Matters Greatly
Have A Working Email Address
We Are Here To Help
The last point is important as we have free customer support that should be taken advan-
tage of. Any additional questions that you may have can be answered by just picking up
the phone and giving us a call or emailing us:
1.888.775.8348
(outside the US, 1.312.265.9309)
http://localhost/var/www/apps/conversion/tmp/scratch_1/[email protected]://localhost/var/www/apps/conversion/tmp/scratch_1/[email protected]