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Momentum stocks offer investors the opportunity to capitalize on strong and continued upward price changes. At the same time, it is an inherently and undeniably risky trading method. Investing in momentum stocks can sometimes counter the notion that time in the market yields better results on average than timing the market.
But for those who identify the right shares at the right time, the rewards far outstrip those more conservative investors swear by. Directional movements are often slow to gain speed but difficult to stop once it hits, hence the name “momentum.” This kind of trading relies more on technical analysis than fundamentals, with catalysts often jump-starting the action.
Viking Therapeutics (VKTX)
Viking Therapeutics (NASDAQ:VKTX) is one of the more exciting biopharma stocks out there. The firm is developing novel therapies to address endocrine and metabolic disorders. It has more than quintupled in price over the past year moving from $3 to more than $16 currently.
One thing to note about momentum stocks is that timing is incredibly important. Catching a momentum stock at the beginning of its downturn is often disastrous. I don’t think that’s the case here, but it should be noted that VKTX has gone from $24 to $16 over the last few weeks.
The reason I don’t believe Viking Therapeutics is going to go on a prolonged selling spree is that nothing negative has happened to the firm. It is pretty much the same company it was with the same pipeline of drugs continuing to progress through clinical trials. That includes drugs in phase 2 clinical trials that show great promise in reducing liver fat in non-alcohol-induced fatty liver disease and weight loss drugs that are in phase 1 trials. Instead, VKTX shares likely grew so rapidly that I assume traders are taking profits off the table.
Aehr Test Systems (AEHR)
Aehr Test Systems (NASDAQ:AEHR) is a small semiconductor firm with a booming stock. It sells test systems for burn-in and testing logic used in the semiconductor industry. Aehr Test Systems creates components for failure testing which it then assembles into systems. The firm has installed more than 2,500 of those systems globally to date.
Its shares have moved from $18 to above $41 in 2023 and traded below $7 a year ago. The company recently reported record bookings from EV semiconductors testing. Firm-wide sales were over $17 million and bookings reached $33.3 million. Its total bookings reached $41 million. Net sales increased by 40% over the last nine months as well.
Part of the reason Aehr Test Systems is currently doing so well is that it serves the burgeoning EV sector. Demand for the complex chips in demand across the EV industry has spurred the company’s shares higher, making investors a lot of money during the process.
Apple (AAPL)
Apple (NASDAQ:AAPL) is moving higher still as a variety of factors propel the stock above a $3 trillion valuation.
The iPhone is a product that simply has no equal. It is the lifeblood of Apple in its current form and accounted for $205.5 billion of the company’s $394 billion in 2022 revenues. Apple has seen iPhone sales begin to slow and expects a slight contraction in top-line results this year.
However, that hasn’t resulted in bearishness. The company has tapped into the market in India which offers great potential. Further, its VR/AR headset with a price tag of $3,499.00 promises to be an interesting money maker as its first new product in a decade.
It’s somewhat ironic that Apple has such strong momentum given the company posted back-to-back quarters of falling revenue. That’s a testament to how much investors believe in the company as it expands into emerging markets with the iPhone. All the company will need is a bit of positive information in any of those areas and it can move higher still.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.