NEW YORK (TheStreet) -- The usual characteristics of momentum stocks include banking huge gains over the last 12 months, being significantly overvalued and having elevated price-to-earnings ratios. During a momentum phase, these stocks will typically have positive but overbought weekly chart profiles, with weekly closes above their five-week modified moving averages. At times these stocks can be out of favor and have significant downside corrections until momentum characteristics return.
As I explained on New Year's Eve, Apple (AAPL) shifted from being a momentum stock in 2012 to a value stock on weakness into April 2013. It then returned to momentum status in the second half of 2013.
As 2014 begins, there appears to be some profit-taking among the 8 momentum stocks I have been following.
Here are my buy-and-trade parameters for these stocks.
Apple ($553.13) ended 2013 at $561.02 with a hold rating, overvalued by 18.2% and with a gain of 5.4% in 2013 and a P/E ratio of 14.1. The stock is below its 21-day simple moving average (SMA) at $559.74 with its 50-day and 200-day SMAs at $539.90 and $474.36. Apple has a positive but overbought weekly chart profile, maintaining momentum characteristics. The stock is above its five-week modified moving average (MMA) at $543.23 and its 200-week SMA at $427.32. My new annual value level is $517.05, with a monthly pivot at $549.13 and an annual risky level at $586.06. Compare this to the recent high of $575.14, set on Dec. 6. My new semiannual risky levels are at $657.40 and $666.94.
Amazon.com (AMZN) ($397.97) ended 2013 at $398.79 with a hold rating, overvalued by 79.8% and with a gain of 59% in 2013 and a P/E ratio of 650.2. The stock set an all-time intraday high at $405.63 on Dec. 27 and is above its 21-day, 50-day and 200-day SMAs at $391.77, $374.34 and $306.79. Amazon has a positive but overbought weekly chart profile, maintaining momentum characteristics above its five-week MMA at $382.47 and its 200-week SMA at $219.17. My semiannual and annual values are $359.11, $351.24 and $334.95, with a quarterly pivot at $402.56 and monthly risky level at $412.18.