DELAFIELD, Wis. (Stockpickr) -- Animal spirits are in complete control of this market.
Just pull up a daily chart for shares of Tesla Motors (TSLA) here and you'll see exactly what I am taking about. That stock is absolutely exploding higher here by 17% to a new all-time high above $250 a share. Momentum traders and trend-following traders are basking in profits in this current market, while anyone who's betting against them is getting crushed on a daily basis.
What exactly is momentum trading? Basically, it's a strategy that aims to make profits off the continuation of existing trends in the market. A momentum trader believes that large increases in the price of a stock will be followed by additional gains -- and vice versa for stocks that are dropping sharply. This strategy is trend trading at its finest because a trader makes the conscious decision to focus only on the price of a stock they're trading. You simply find the momentum and trade it like you're a surfer riding a wave out to sea.
Part of momentum trading is ignoring everything but the price of the equity you're trading. This is why TSLA bulls have banked such huge gains -- they've ignored the bears who constantly scream about the lofty valuation. Momentum and trend traders need to have great noise filters so that they do not let anything beyond the trend, price and volume patterns of a stock drive their decisions. These market players like to trade what they "see," not what they "think." Opinions have no place in this type of trading because they will create bias and keep you out of great trades -- such as this move in TSLA.
With that in mind, here's a look at five momentum stocks that could be setting up for sharp spikes higher in the near future.