Momentum can make a stock move extremely rapidly in a very short space of time and this can create an outstanding lucrative profit opportunity for you.

You will over time with experience, learn to recognize most of the typical chart patterns that will occur when stocks are experiencing a lot of volatility. Occasionally these stocks will move exceedingly well for no specific reason at all, but on other occasions it is either a news headline or a rumor that will cause these stocks to move upwards extremely rapidly.

When a stock moves upwards on a news announcement the trade is actually very similar to a momentum trade that happens for no obvious reason but there are some clear-cut differences that you need to be aware of.

Firstly, the timing is different on a news trade mainly because the momentum happens so much more rapidly than usual. Secondly, news produces opportunities with other stocks in the same sector that you may not have otherwise had a news announcement

We will now lake a look at the timing of a news trade.

When a share price has moved upwards because of either a good or a bad news announcement, you will straightaway see a rapid increase of trading volume as traders respond and buy the stock to take advantage of something positive or quite possibly will sell to take their profits if they previously owned the stock.

Fundamental analysis as we all know by now, is the best method of checking out the financial condition of a company. This is easily accomplished by using financial reports, price/earning ratios, incomes, market share, sales and growth, etc.that are available This type of analysis can be very time consuming but I find it well worthwhile the effort that I put into it.

Here are a few factors that I take into consideration when researching a potential stock.

1 Earnings Per Share (EPS) .This shows me the stock’s average short term (recent quarters) and long term (last three years) earnings growth rate actually is.

2 Relative Price Strength (RPS) This measures a stock’s relative price change in the last 12 months in comparison to other equities Iin the Stock market.

3. Sales + Profit Margins + ROE (Return on Equity). This shows you a company's sales growth rate during the last 3 quarters, before and after profit margins and the return on equity.