How to Find Trending Stocks in 2024

The truth about finding trending stocks is that the answer isn’t as simple as a search query or a recommendation list. You might think the stock market follows predictable rules, but it doesn’t. What sets apart successful investors from the rest is the ability to spot trends before everyone else notices. This might sound like an impossible task, but it's far from that. The secret lies in knowing where to look, understanding the broader market, and being adaptable. There’s no single path to discover trending stocks, but with a few techniques, you’ll be ahead of the game.

Let’s take a moment to paint a picture of how some of the most famous stock pickers found their winning investments. It wasn’t luck or inside information. It was due diligence, trend recognition, and the ability to assess market sentiment. They knew that being early in a trend is often more profitable than jumping on board once the masses arrive.

But here's the big reveal—social media, alternative data, and market influencers have revolutionized stock-picking in ways unimaginable a decade ago. Reddit’s WallStreetBets, for example, turned stocks like GameStop and AMC into viral sensations. Social platforms are now treasure troves of information that can help you identify what’s trending. The trick is to navigate these platforms effectively, separate noise from valuable data, and understand sentiment before it becomes mainstream.

Social Media and Community Insights

In 2021, GameStop’s stock skyrocketed, catching even experienced investors off guard. What was behind this? The power of online communities. Reddit users coordinated, shared insights, and drove up prices. Twitter, TikTok, and even YouTube are full of traders sharing ideas that could eventually go viral. Tools like BuzzSumo or Google Trends can be used to analyze the popularity of stock-related topics, offering a glimpse into which stocks are gaining attention.

But remember, social media trends don’t last long. Once the hype reaches the mainstream, the price may already be inflated, which leads to significant volatility. Knowing when to jump off is just as important as knowing when to jump on. The ability to read between the lines and detect early signals is crucial.

Data Mining and Stock Screening Tools

Now, let’s look at the modern tools of the trade. Stock screening tools like Finviz, TradingView, and Yahoo Finance offer robust filtering options to help you find stocks with increasing volume, upward momentum, and positive sentiment. But that’s just the beginning.

With today’s tech, many investors are diving into alternative data sources to identify trends. This includes monitoring online sales data, satellite imagery for supply chain insights, and web traffic statistics. Companies like Quiver Quant offer data mined from public sources like government contracts, politician trading records, and even corporate web scraping.

These sources allow investors to get a fuller picture of the market beyond what traditional metrics like price-to-earnings ratios or quarterly earnings reports would provide. It’s about seeing the iceberg below the water, not just the tip.

Back-testing strategies with historical data is another excellent technique. Services like Portfolio123 allow investors to test their stock-picking strategies against past market data. The aim is to predict whether a strategy that worked in the past would likely succeed in the current environment.

Insider Trading Reports

A more conventional but often overlooked way of finding trending stocks is to follow the insiders. Directors and CEOs are required to file reports when they buy or sell shares of their own company. Following insider trades can provide clues about a stock’s future movement. Form 4 filings, which record these insider trades, are publicly available and can be an early indicator of strong company performance.

It’s not foolproof, of course, because insider trades may happen for a multitude of reasons. But when several insiders at the same company start buying at the same time, it’s often a sign that good news is on the horizon.

Sector Rotation and Macro Trends

Then there are macro trends. Large, systemic changes in the economy, society, or technology can lead to entire sectors becoming the “it” investment space. For example, during the COVID-19 pandemic, remote work solutions, e-commerce, and healthcare stocks saw massive spikes.

Today, AI, renewable energy, and electric vehicles are sectors where you’ll find trending stocks. But how do you get ahead of the curve? Sector rotation is a common strategy, where investors move money from one sector to another based on macroeconomic indicators. For instance, when interest rates are rising, banks and financial stocks often benefit.

Staying updated on global news, political events, and technological advancements is crucial here. Stocks that are currently trending in the tech world might not necessarily be the ones to trend next year. The real winners may be found in biotech or even space exploration, which is seeing increasing interest from governments and private companies alike.

Earnings Reports and Analyst Upgrades

It’s no surprise that earnings season provides a regular pulse for what’s trending. Companies that outperform expectations often see their stock price soar, while those that disappoint can face brutal declines. Keeping track of quarterly earnings and guidance reports helps investors stay updated on which companies are growing and which are facing challenges.

Additionally, analyst upgrades can create a ripple effect. When a well-known financial analyst from firms like Goldman Sachs or Morgan Stanley upgrades a stock, it tends to generate buzz, often resulting in more buying activity.

However, the downside is that by the time a stock receives a rating upgrade, the biggest gains may already be realized. That's why seasoned investors keep an eye on pre-upgrade activity, including unusual volume spikes or a company's increased media exposure.

IPOs and SPACs

In recent years, initial public offerings (IPOs) and Special Purpose Acquisition Companies (SPACs) have drawn massive attention. Some of the biggest stock movers over the past two years were companies that either went public or merged through SPACs.

Understanding the SPAC market is critical for spotting future trends. While many of these companies remain speculative for a while, finding the few that disrupt industries can lead to significant profits. The process of going public through a SPAC often results in explosive stock movements, especially when high-profile sponsors and entrepreneurs are involved.

Risk Management in Trending Stocks

Finally, it’s essential to remember that chasing trends comes with its risks. Volatility is common with trending stocks. It’s easy to get caught up in the momentum, but discipline is crucial. Trend investing is more about timing and adaptability than about long-term holding.

Setting stop losses or having an exit strategy can prevent significant losses if the trend reverses. Remember, it’s okay to miss out on a trend if the risk is too high. Sometimes the best decision is to wait for the next opportunity rather than chase an inflated stock price.

Trending stocks are unpredictable, but that's what makes the game exciting.