Why is it that you don't often see a very strong, positive day erased by sellers shortly after that move? It seems that a simple strategy would be to find the stocks that blasted off, having some abnormally large positive day and then just start getting long to ride the momentum. Well, it is a common strategy but they don't all work. Understanding which days to chase and which to avoid can help you hone in on the great ones.

The first thing you want to think about is the psychology of that move. Is it that the big move just came out of nowhere and shocked people or was the stock already performing nicely and then it had the strong move? If the move came out of nowhere and slowly got stronger and stronger throughout the day then you can really feel how people were thinking they would wait for a pullback, but after seeing it move higher and higher decided they better jump in and chase. This mentality happening all day long is what causes such a move. The other thing is that the buyers are all new and just joining the excitement.

On the other hand if you see a stock has had a few nice days and for some reason today is especially strong then you have to assume that, yes you did attract some new buyers to the stock, but you likely also have those that are averaging in on the way up, adding more to their position. This type of move can be a little more dangerous because those that are adding in have a lower cost basis than those that just bought. If the majority of the longs are in with lower cost basis then the stock is subjected to the erratic moves of the short term, new buyers that jump at every move the stock makes.

The best bet is to jump on board in the beginning and join those that are just now coming along for the ride. This would look like a sideways trending stock that suddenly has a sharp move higher during the day. Those plays tend to hold on and continue their momentum.