Fly Fishing the Stock Market: How to Search for, Catch, and Net the Market's Best Trades

FUNDAMENTALS ON FIRE: MOMENTUM TRADING

Several years ago, I had the opportunity to travel to Alaska and fly fish the American River in Katmai National Park. One of the most enjoyable parts of that trip to angler's paradise involved the “muddler minnow” imitation fly. On the first day, as we began to float in a drift boat down the middle of this quiet river, the guide demonstrated a perfect cast, slinging the minnow fly over to the bank, onto the grass just off the water. As the boat drifted a few feet more downstream, it pulled the line and the minnow into the edge of the water. As soon as the fly imitation hit the water, the guide stripped three feet of line three times, as fast as he could to replicate a swimming minnow. Suddenly, the water erupted as a fish bit the barb, setting the hook in the jaw of a beautiful six-pound rainbow trout. That technique of giving the minnow swift, life-like action enticed wary rainbows away from their protective cover, as they dashed out to chase down what they perceived to be dinner. We caught many fish that day using the same technique we had been shown. It was a day that was written up in my fishing journal to be remembered forever.

Some of the big, trendy stocks with enormous earnings and growth attract worldwide volume. The exceptional fundamentals of these leaders in their industry support very high price valuations. These high-priced behemoths, such as Apple, Google, and others, catch fire as their prices get bid up to dizzying heights. ...