Fairlead Strategies’ Katie Stockton: 3 Momentum Stocks You Shouldn’t Be Shorting

Fairlead Strategies’ managing partner Katie Stockton was on Schwab Network commenting on three momentum stocks earlier today.

The shares of Tesla (TSLA), Palantir (PLTR), and MicroStrategy (MSTR) have recently accelerated after already rising a great deal, Fairlead Strategies’ Katie Stockton said. As a result, their rallies should be respected, she explained. These names could rally further into the end of the year before undergoing corrections in the first quarter, she added. Moreover, the 20-day moving averages of all three of those stocks are still rising, Stockton noted.

I have to say Tesla. Palantir, MicroStrategy are showing the sentiment behind the market right now. We’ve seen them absolutely accelerate within their already steep uptrends. So that’s a message to us that we want to respect the momentum to the upside while we have it. We’ll be really scrutinizing the near term action with the thought that we could see another push higher into year end, but then a corrective phase in Q1.

In light of these points, it would probably not be a good idea for anyone to short these high-momentum stocks until January at the earliest. At that time, traders should keep an eye on the stocks’ 20-day moving averages.  That’s because, according to Stockton, once those names’ 20-day moving averages begin to drop, it may be a good idea for traders to prepare for them to enter a corrective phase.  The 20-day moving averages convey stocks’ “primary trends” and shed light on their momentum, she explained.

Turning to Nvidia (NVDA), Stockton believes that the shares are no longer one of investors’ favorites, as NVDA stock has lost its momentum while its Relative Strength has declined.

While we acknowledge the potential of NVDA, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ ALSO 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock

Disclosure: None. This article is originally published at Insider Monkey.