UK Index is well off May’s 7903 record highs, as fears of US-EU-China multilateral trade war and the spill-over from Turkish Lira’s troubles are souring market sentiment. But that isn’t preventing many stocks on UK 100 from reaching record highs. Here are a few names I’ve been focused on this week.

The overall market sentiment may be downbeat, but there are plenty of stocks that are doing great recently, like AstraZeneca, Burberry, Ashtead and JD Sports Fashion. All of them hit their record highs either this week or last week.

What keeps these stocks going when many other heavyweight UK Index components are shedding 5-10% per day? One word: momentum. We’ve recently published a special report on Momentum Investing and you can get access to it for free by signing up to our Research and Trade Ideas.

A traditional investor will “buy low and sell high”, but a momentum investor will instead “buy high and sell higher”. Instead of looking at fundamental criteria such as earnings and P/E ratios, momentum investors will look purely at technical indicators, such as trend lines and moving averages.

At its core, momentum investing is about understanding the psychology of the market and how traders tend to “rush” into certain stocks and drive them up or down not just based on fundamental value, but also because of emotion and market inertia. The goal of momentum investing is to identify and profit from such bull rushes. Some companies can become “story stocks”, with investors feeling a sense of pride, accomplishment and belonging just from owning certain company shares (Apple and Alphabet are good example of such “story stocks”).

So, is now the right time to invest in momentum stocks like Burberry? That depends on composition of your individual portfolio and your risk appetite, but here are some of the key things to keep in mind when trading momentum stocks.

Shares can be usually subject to technical analysis where investors can identify support and resistance levels to generate buy and sell signals. But momentum stocks at record highs, by definition, don’t have a resistance level. For them, the sky is the limit!

This is where research comes into play. There are other technical indicators besides support/resistance that can help you trade momentum stocks, like MACD or RSI. Go ahead and have a look at our education portal to learn more about them.

For many investors, shares at record highs can become a continuous trading opportunity. Buying high, letting momentum accelerate, waiting for it to cool off, taking profit, then going in for another round.

But it is equally important to look out for things that can disrupt forward momentum, like negative company news, important macroeconomic data, geopolitics, or even influence of important sector competitors. If you are interested in benefiting from AstraZeneca’s record highs, don’t forget to pay attention to GlaxoSmithKline shares for read-across.

UK 100 may be down in the dumps, but your financial portfolio doesn’t have to be. Happy hunting for trading opportunities, investors! And if you need any helping hand, get in touch with me and we can discuss momentum stocks in more detail.

Joe Nguyen, Trader at Accendo Markets, 17 August 2018