Screen for Trends - How to Identify a Surge in Momentum

A surge in momentum frequently occurs after a breakout: something has changed, news that has caused investors to abandon caution and chase the stock price higher. There are three stock screen filters that we can use to identify this:

  • Directional Movement: DI Difference
  • RSI Crossovers
  • Twiggs Momentum

Momentum Screen Filters

Our focus is on long-term up-trends, that are expected to run for at least six months. We therefore use momentum filters with a time period of 13 weeks (half of the six month period).

DI Difference

Calculates the difference between current DI+ and DI- values.

Figure 1: DI Difference with a Minimum of 20.
Screen for Directional Movement Index. Example filter settings: DI Difference (DI+ less DI-) no less than 20

Try the following values:

  • A Minimum of 20 or 25 for the S&P 500 or ASX 200
  • A higher Minimum of 30 or 40 for faster-moving small caps in the Russell 3000 or ASX.

RSI Crossovers

Look for RSI Crossovers above 70 in recent weeks.

Figure 2: Recent RSI Crossover above 70.
Screen for Relative Strength Index Crossover. Example filter settings: RSI crossed above 70 percentile

Twiggs Momentum

Look for Twiggs Momentum with a Minimum value of 50.

Figure 3: Twiggs Momentum with a Minimum of 50.
Screen for Twiggs Momentum Oscillator. Example filter settings: TMO value no less than 50

Example Screen Results

The results of our screen run on the S&P 500, Russell 3000, and ASX stocks are shown below.

S&P 500

If we combine all three filters, we get the following results for the S&P 500.
RSI (13week,Wilder,70) values reflect the number of consecutive weeks above 70.

S&P 500 Screen for Momentum Step 1
Figure 4: The most easily recognizable is Nvidia (NVDA), with RSI holding above 70 for 14 weeks.
Nvidia (NVDA) with Relative Strength Index RSI

Russell 3000

We ran a higher Minimum of 40 (on DI Difference) for the Russell 3000 to reduce the number of stocks returned:

Russell 3000 Screen for Momentum Step 1
Figure 6: Biotechnology stock Immunogen (IMGN) surged in May ahead of strong Phase 3 trial results for its antibody-drug conjugate Elahere for treatment of ovarian cancer.
Immunogen (IMGN) with Relative Strength Index RSI

ASX

We had to go outside the All Ordinaries to find fast-trending stocks on the ASX:

ASX Screen for Momentum Step 1
Figure 7: Voltaic Strategic Resources (VSR) has been in a strong up-trend since May.
Voltaic Strategic Resources (VSR) with Relative Strength Index RSI

Conclusion

We use three filters to find a surge in momentum:

  • Directional Movement: DI Difference
  • RSI Crossovers
  • Twiggs Momentum

Adjust the minimum value for DI Difference depending on whether large or small cap stocks:

  • At least 20 for the S&P 500 or ASX 200
  • At least 30 for the broader Russell 3000 or ASX

Disclaimer

Please note that stocks shown are for illustration purposes only and are not recommendations. Readers should conduct their own research.

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