Visualizing holdings for a dual momentum rotation strategy | chart of art

As the name suggests, the dual momentum rotation strategy focuses on stocks that are in absolute and relative upward trends. This is a two-step process. First, filter out stocks that are in a long-term downtrend and focus only on stocks that are in an upward trend. Second, rank stocks according to performance metrics and focus on the strongest stocks. TrendInvestorPro implements two dual momentum rotation strategies.

Traditional trend-following indicators, such as the 200-day SMA, measure absolute momentum. For example, a stock is in a long-term uptrend when it exceeds its 200-day SMA. Stocks trading below their 200-day SMA are in a long-term downtrend and fail to enter the second stage.

For stocks in a long-term upward trend, chartists can quantify performance by using the 200-day percentage change and comparing the values ​​to find the strongest one. A stock with a 49% change is stronger than a stock with a 19% change.

The image below shows a CandleGlance chart for the top Nasdaq 100 stocks. Ranked based on 200-day percent change (ROC(200)). “Add indicator” is a rate of change of 200 and “Sort by indicator” is in descending order (outlined in red). These 12 stocks are also above their 200-day SMA (red line) and in a long-term upward trend.

As you can see in the green ovals, Nvidia (NVDA), Crowdstrike (CRWD), and Constellation (CEG) are up more than 100% over the past 200 days, while the remaining nine are up more than 50%. Chartists running a dual momentum rotation strategy will focus on these key companies when constructing their portfolios. Strength begets strength.

At TrendInvestorPro, we use a similar process for our dual momentum rotation strategy. We level the playing field by using a volatility-adjusted version instead of the raw rate of change. NVDA, CRWD, and CEG are part of the Nasdaq 100 strategy’s current portfolio. We also have a separate strategy for S&P 500 stocks. Both strategies are off to a good start this year, and you can see their full performance metrics here.

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