One day doesn’t make or break the trend, but stocks tumbled Thursday amid fears of a second wave of coronavirus cases. Data from states that did not implement shutdowns and those that were quick to reopen their economies confirm that the virus is still a force to be reckoned with.

A new round of COVID-19 cases could prompt investors to revisit the AGFiQ U.S. Market Neutral Momentum Fund (MOM), an ETF that performed admirably during the March broader market swoon.

MOM seeks results that are in tune with Dow Jones U.S. Thematic Market Neutral Momentum Index. In order for the fund to accomplish its goal, “MOM provides exposure to the ‘momentum’ factor by investing long in U.S. equities that have had above-average total returns and shorting those securities that have had below-average total returns,” according to the fund’s fact sheet.

“Houston-area officials are ‘getting close’ to reimposing stay-at-home orders and are prepared to reopen a Covid-19 hospital established but never used at a football stadium as virus cases expand in the fourth-largest U.S. city,” reports Bloomberg.

Renewing Faith in MOM

Momentum—once it picks up, it can be difficult to stop and while the debate in the capital markets is whether value can sustain its lead overgrowth, investors can’t forget about the momentum factor, especially if events like a coronavirus easing or cure stir a rally for riskier assets.

The momentum strategy is based on a simple idea, the theory about momentum states that stocks which have performed well in the past, should continue to perform well, while on the other hand, stocks which have performed poorly in the past, should continue to perform poorly.

“The warnings of a worsening outbreak reinforced alarms sounded by national health officials over the risk of a second wave of infections beyond the initial U.S. hot spots led by New York and New Jersey,” according to Bloomberg. “Texas has been among the states pushing hardest to ease lockdowns imposed during the first wave of a disease that has killed more than 113,000 Americans.”

High momentum stocks are those that are capable of rising very fast in a short period of time, which makes them very attractive to potential buyers. However, in many cases, these stocks can also crash unexpectedly and carry significant risks as a result. When handled properly, however, momentum trading can be a rewarding method of profiting from the stock market.

For more alternative investing ideas, visit our Alternatives Channel.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.