Buy These 5 Stocks With Recent Price Strength

In the stock game, winning means reaching a higher price.

However, finding a win-win strategy is easier said than done. In the current highly volatile market, it is difficult for even an ardent investor to come up with a foolproof approach.

One could resort to commonly used techniques to find beaten down stocks that have the potential to recover faster than others. But this bears the risk of disappointment. Particularly, one could be stuck in the value trap if the hidden weaknesses in the selected stock are not identified.

So, wouldn’t be a safer strategy to look for stocks that are winners currently and have the potential to gain further?

Here’s how to execute it:

One should primarily look for stocks that have recently been witnessing a price increase. Actually, stocks backed by recent price strength have a high chance of carrying the momentum forward.

If a stock is continuously moving higher, there must be a good reason for the rise or else it probably would have fallen or remained stable. So, looking at stocks that have already won the game and are capable of beating the benchmark that they have set themselves sounds rational.

However, recent price strength alone cannot create magic, so you need to set other relevant parameters for a successful investment strategy.

Here’s how you should create the screen to shortlist the current as well as the potential winners.

Screening Parameters:

Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.

Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.

Zacks Rank 1: No matter whether the market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance.

Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.

Current Price greater than 5: The stocks must all be trading at a minimum of $5 or higher.

Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.

Here are five of the 10 stocks that made it through this screen:

Entercom Communications Corp. (NYSE:ETM) is the fourth largest radio broadcasting company in the United States. The company sports a Zacks Rank #1 (Strong Buy) and surpassed the Zacks Consensus Estimate thrice in the preceding four quarters.

AMN Healthcare Services Inc. (NYSE:AHS) is a travel healthcare staffing company. The stock carries a Zacks Rank #1 and surpassed the Zacks Consensus Estimate in each of the preceding four quarters with an average positive surprise of 23.59%.

Amerisafe, Inc. (NASDAQ:AMSF) is a specialty provider of workers' compensation insurance. The stock carries a Zacks Rank #1 and surpassed the Zacks Consensus Estimate in each of the preceding four quarters with an average positive surprise of 25.86%.

Nanometrics Incorporated (NASDAQ:NANO) is a leader in the design, manufacture, marketing and support of process monitoring systems for the semiconductor, data storage and flat panel display industries. The stock carries a Zacks Rank #1 and surpassed the Zacks Consensus Estimate in each of the preceding four quarters with an average positive surprise of 104.17%.

Ebix Inc. (NASDAQ:EBIX) is one of the leading international suppliers of software and e-commerce solutions to the insurance industry. The stock carries a Zacks Rank #1 and surpassed the Zacks Consensus Estimate in the preceding four quarters with an average positive surprise of 14.95%.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

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