Shares in Energean (LON:ENOG) have led a strong move away from the market average in recent weeks. On a relative price strength basis, the price is up by 6.13% against the market over the past three months. The last close price was 538.8p.
The move comes after a volatile spell for the UK equities. Markets collapsed in March on concerns about the unfolding Covid-19 crisis. And while index prices have rallied in recent weeks - taking a lead from US markets - there are still grave concerns about the near-term outlook for corporate earnings.
The upside for Energean is that investor optimism is translating into positive price momentum, which is regarded as a leading predictor of future performance...
Trading the trend
Research by some of the investment industry's most respected strategists shows that relative strength can be one of the most consistently useful pointers to growth.
Price momentum is heavily influenced by psychology, with investors under-reacting and subsequently over-reacting to company news, driving prices higher over time.
The catch is that investor sentiment is prone to wild swings, which makes momentum risky when used on its own. Combining it with other factors, like attractive valuation, high quality and low volatility, can help reduce that risk.
Overall, the upward trend in the share price of Energean over the past three months is a promising sign. But while the stock has been outperforming recently, relying on momentum in volatile markets can be hazardous.
What does this mean for potential investors?
Shares in Energean have outperformed the market over the past three months - but momentum on its own is no guarantee of future returns.
To get a better idea about whether this trend will continue, it's worth doing some investigation yourself.
Disclaimer: These articles are provided for information purposes only. The content is not intended to be a personal recommendation. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. The author has no position in the stocks mentioned, unless otherwise stated.
Which stock should you buy in your very next trade?
With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities.
In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record.
With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.