ASX Momentum Trading Returns: 72% of Stocks Above 50-Day Moving Average

The ASX momentum profile has surged to levels better than 87% of all historical observations, signalling a significant shift in market conditions. With 72% of companies now trading above their 50-day moving average, momentum trading conditions have returned to levels not seen since previous bull market phases. This represents a 29% improvement in the statistical probability of identifying viable momentum setups across Australian equities.

Leading this momentum resurgence are three distinct sectors: lithium, gold, and copper. Each demonstrates the characteristic price and volume patterns associated with institutional accumulation and sector-wide strength. However, beyond these established leaders, the Launch Pad analysis reveals emerging patterns that warrant attention for those studying momentum trading methodology.

Watch Christopher Hall analyse these momentum patterns using live ASX examples to demonstrate the educational principles discussed in this analysis.

Understanding the Momentum Profile Shift

The momentum profile metric aggregates multiple technical indicators across the entire ASX universe to measure the overall health of momentum conditions. When this metric reaches levels better than 87% of historical observations, it indicates that market structure favours momentum-based approaches over mean-reversion strategies.

This improvement stems from several technical factors working in concert. The percentage of stocks above their 50-day moving average serves as a breadth indicator—when 72% of companies achieve this threshold, it demonstrates broad participation rather than narrow leadership. Historical analysis shows that sustainable market advances typically require at least 60% of stocks maintaining positions above this key moving average.

Remember that past performance is no guarantee of future results, and all trading involves risk. The patterns discussed here represent educational analysis of historical market behaviour rather than predictive indicators.

Current Momentum Leaders: Sectoral Analysis

Lithium Sector Dominance

The lithium sector exhibits multiple companies demonstrating Volatility Contraction Patterns (VCPs), the signature setup popularised by Mark Minervini for identifying institutional accumulation phases. Oceana Lithium (OCN) provides a textbook example, advancing from 2 cents to 38 cents while displaying the progressive contraction characteristic of supply exhaustion.

The pattern shows three distinct contractions, each smaller in both price amplitude and time duration than the previous consolidation. Volume behaviour confirms the setup—diminishing during pullbacks, expanding on rallies. This supply-demand dynamic suggests institutional participants accumulating positions while retail sellers exit, creating the volatility contraction that precedes significant moves.

Winsome Resources (WR1) and Galan Lithium (GLN) display similar structural patterns, though each at different stages of base development. WR1 exhibits a longer base-building phase after a significant decline, while GLN demonstrates the pocket pivot entry technique—a single-day setup where volume exceeds the highest down-day volume of the previous ten trading sessions while the stock advances.

Gold and Copper Exposure

Forrestania Resources (FRS) represents an interesting case study in thematic overlap. Primarily focused on gold exploration, the company maintains lithium exposure through proximity-based assets near world-class deposits. This dual exposure creates unique trading characteristics—companies can respond dramatically to lithium price movements while maintaining the ability to divest these assets with minimal capital commitment if sector conditions deteriorate.

Historical analysis of similar dual-exposure companies during previous lithium cycles shows they often serve as "canary in the coal mine" indicators. When these peripheral players begin underperforming, it can signal approaching sector rotation despite continued strength in pure-play lithium producers.

Launch Pad Pattern Recognition

The Launch Pad methodology identifies companies exhibiting early-stage momentum before they appear in established leader lists. Current analysis reveals a cluster of rare earth element and critical minerals companies, with four out of five sharing a common characteristic: US-domiciled assets.

This concentration reflects broader geopolitical trends. Supply chain politicisation has created funding flows into domestic projects, particularly those involving defense-critical materials. Encounter Resources (ENR), Victory Metals (VTM), Resolution Minerals (RML), Diatreme Resources (DRE), and Nova Minerals (NVA) all demonstrate this exposure while displaying various technical setups.

Pattern Analysis Across Launch Pad Stocks

Encounter Resources shows a V-shaped bottom formation following a significant decline. While not the ideal VCP setup emerging from strength, the company maintains exposure to critical minerals with US project locations. The volume pattern during the December-January period shows characteristic drying up before the recent advance.

Victory Metals demonstrates a more traditional VCP structure after receiving significant funding from the Export-Import Bank of China. The $190 million commitment provides the fundamental catalyst supporting technical patterns. The setup shows three contractions with diminishing amplitude before the breakout above the 50-day moving average.

Resolution Minerals presents challenges for traditional entry techniques due to rapid vertical advances, but the pattern reveals the institutional footprint characteristic of politically-driven thematics. The Department of Defense grant announcement created what some analysts describe as "legal insider trading"—large institutions and connected participants loading positions in neighboring assets before public awareness peaks.

Rare Earth Elements: A Developing Thematic

The cluster of rare earth element companies in the Launch Pad represents more than coincidental technical setups. Historical analysis of thematic breakouts shows they rarely occur simultaneously. Instead, leaders emerge over weeks and months in sequential fashion.

The 2021 lithium cycle provides instructive precedent. Over a three-month period from May through August 2021, twelve different lithium companies formed VCP patterns and broke out in staggered succession. This sequential pattern allowed traders studying thematic development to identify multiple entry opportunities rather than chasing a single initial mover.

Nova Minerals' explosive move on defense funding news demonstrates the information asymmetry present in politically-driven sectors. While direct participation in such rapid moves requires precise execution, the thematic implications extend beyond the initial mover. Sister companies often develop tradeable setups three to seven days after the lead stock's advance, as information flows through different jurisdictions and market participants.

Volume and Price Behaviour Insights

Across the momentum leaders, certain volume characteristics repeat consistently. The ideal pattern shows volume expansion during advances and contraction during pullbacks—the classic accumulation signature. However, the rare earth cluster displays more erratic volume behaviour, reflecting the retail-heavy participation typical of politically-driven themes.

Companies like Galan Lithium demonstrate the concept of exhaustion selling—where a heavy-volume down day fails to produce follow-through selling. This represents potential supply exhaustion, particularly when the stock closes well above the intraday low. From a Wyckoff analysis perspective, such action can constitute a "spring"—a false breakdown that shakes out weak holders before a reversal.

The 10-day moving average serves as a useful reference for established trends. Leaders like Forrestania Resources respected this moving average throughout their advance, providing a logical reference point for trailing stop placement in educational examples. When stocks begin closing below this average on heavy volume, it often signals trend deterioration worth monitoring.

Educational Application for ASX Momentum Study

These patterns illustrate core momentum trading principles applicable to Australian market conditions. The VCP framework requires several elements working in concert: established uptrend, progressive contraction in volatility, volume confirmation, and relative strength versus the broader market.

Screening for these setups involves filtering the ASX universe for stocks above key moving averages (50-day, 150-day, 200-day) while maintaining strong relative strength rankings. The additional sector filter—focusing on leading groups—further refines the opportunity set.

Position management concepts from Mark Minervini's methodology suggest scaling into positions as they prove themselves rather than committing full position size at initial entry. The educational framework involves entering a partial position at breakout, adding to strength, and using the 10-day moving average or swing lows as trailing stop references.

For those studying momentum methodology, the current environment provides real-time examples across multiple sectors and pattern types. From textbook VCPs in lithium stocks to more complex dual-exposure situations in gold-lithium companies, the variety supports comprehensive pattern recognition development.

Build Your Launch Pad Pattern Recognition Skills

The rare earth elements cluster appearing in Launch Pad analysis—with four of five companies featuring US-domiciled assets—demonstrates how geopolitical catalysts create tradeable thematics before mainstream recognition. Department of Defense funding commitments, supply chain politicisation, and defence-critical mineral priorities establish the fundamental drivers supporting sequential breakouts—but identifying these emerging patterns requires systematic Launch Pad screening methodology.

Christopher Hall analyses these thematic developments through weekly video breakdowns on the Finer Market Points YouTube channel, where educational content demonstrates systematic approaches to identifying momentum clusters across ASX sectors. The emphasis centres on developing repeatable screening processes rather than individual stock selections.

Test your Launch Pad pattern recognition with the free momentum trading quiz to evaluate your ability to identify emerging thematics, volatility contraction setups, and sector rotation signals before they appear in momentum leader rankings. Developing these systematic screening capabilities provides the framework for recognising institutional accumulation patterns across sectors experiencing structural catalysts.

The rare earth market's evolution from environmental concerns driving production offshore in the 1990s to current supply chain security priorities demonstrates how political drivers create multi-year thematic opportunities. Whether current funding commitments translate to sustained sector performance depends on project execution timelines, Chinese export policy responses, and global demand trajectory—variables that momentum traders track through Launch Pad methodology rather than fundamental conviction alone.

Key Takeaways

The ASX momentum environment has shifted dramatically, with 72% of stocks above their 50-day moving average representing a meaningful improvement in market breadth. Lithium, gold, and copper lead current momentum, while rare earth elements and critical minerals emerge in the Launch Pad analysis.

The cluster of US-domiciled rare earth projects reflects political drivers creating funding flows independent of traditional commodity cycles. This creates both opportunities and challenges—rapid moves driven by government announcements can be difficult to trade directly, but thematic implications often play out over weeks through sister companies.

VCP patterns, pocket pivots, and volume analysis provide the technical framework for identifying these setups. However, educational study of these concepts differs substantially from implementation, which requires risk management, position sizing, and market timing skills developed through extensive practice and experience.

FMP YouTube members access comprehensive momentum trading education through weekly analysis, community discussions, and the complete video library covering these systematic approaches to ASX momentum identification.

Continue developing understanding of these momentum concepts through additional educational content on VCP patterns, sector rotation analysis, and Launch Pad methodology.

Educational Disclaimer: This content is for educational purposes only and does not constitute financial advice. Past performance is no guarantee of future results. Consider individual financial situations and seek professional advice before making investment decisions.

Finer Market Points Pty Ltd, CAR 1304002, AFSL 526688, ABN 87 645 284 680. This general information is educational only and not financial advice, recommendation, forecast or solicitation. Consider objectives, financial situation and needs before acting. Seek appropriate professional advice. We accept no liability for any loss or damages arising from use.