Studies by leading experts on the power of price momentum show that stocks with the strongest price trends can potentially keep pace for up to a year. This is largely due to investor psychology.
In this spirit, share in Entry Oil (TSE: IPO) have been on an upward trend in recent months, and the question for investors now is whether this price strength will continue.
Know exactly what motivates relative strength in share the prices can help you find profitable momentum-based trades – but does Inplay Oil do the trick?
Inplay Oil (TSE:IPO) performance to date
In terms of relative price strength the stock has performed well against the market over the past year:
- 1 month: 58.2%
- 6 months: 208.3%
- 12 months: 759.8%
Relative strength is a useful tool in the arsenal of technical traders and investors. It is an instant measure of a stock’s performance against a benchmark.
And as long as there is no certainty on which direction a stock will move next, research shows that price trends often persist. Why is it? Overall, studies show that it is:
- Initial underreaction by investors – prices are slow to rise because investors are reluctant to outbid stocks that are already well oriented.
- Delayed over-reaction – investors chasing higher prices attract the attention of other investors, who follow them in these transactions, pushing prices higher and higher.
Either way, stocks with positive price momentum often see their prices rise.
What does this mean for potential investors?
Inlay oil is currently among the stocks with the strongest six-month and one-year relative price strength in the market. But momentum itself is no guarantee of future returns.
To get a better idea of whether this momentum is continuing, it’s worth doing some research yourself. Indeed, we have identified some areas of concern with Inplay Oil which you can read about here.
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