The Life of a Momentum Stock
As more and more rookies come to Bennett and myself talking about Bitcoin, a second look at the chart gave me an idea on a pretty valuable lesson -- the life cycle of a momentum stock.
1. First these stocks trade in tight ranges as there's not too many eyes on them. If you look bottom left of the Bitcoin chart above, it's just that, trading in relatively tight ranges and not talked about outside of trading circles.
2. As it begins to advance, more and more eyes get on the stock, and the trading ranges begin to increase. Instead of going up and down $3 per session, it's moving $6. There are large moves up and down as it hasn't really built support along the way up.
3. It becomes a HOT stock. Everyone is talking about it as it's breaking all time highs and is virtually going parabolic.
Here are my favorites of the past few years: