Hot stocks are always a topic of conversation among traders and investors. However, many outside of Wall Street do not understand what makes these names attractive in the first place. Being able to identify hot stocks before they pop, or early in their run allows traders greater profit opportunity.

One method of identifying hot stocks is developing a screening tool that monitors large volume spikes during the trading session. Large volume usually precedes large moves; think of it as an igniter that starts the fire. Hot stocks remain active for weeks, sometimes months at a time. Consequently, it is a good idea to scan for stocks that did abnormal volume the previous session. They typically have follow through for some time.

Scanning for price spikes during and after a trading session will also help traders identify hot stocks. Large price moves attract momentum traders, which causes a stock to become hot and active- it is a self fulfilling prophecy.

Hot Stocks In The Market Now

Xunlei Limited  (NASDAQ : XNET) a cloud-based acceleration technology company, operates an Internet platform for digital media content in the People’s Republic of China. This name has a 52 week price range between $3 and $27. They are developing a way to incorporate blockchain technology into their cloud platform. Investors seem to be unclear on the exact business structure of the company, which makes it very competitive.

Consequently, when one side of the market admits defeat, the trade is left one-sided. This causes outrageous price moves, resulting in the name becoming hot. Average daily trading volume increases, liquidity becomes greater, and the price move are dramatic. Savvy traders make their yearly profit on hot stocks. However, this is a trading style that does not fit all.

Gogo Inc. (NASDAQ : GOGO) provides in-flight connectivity and wireless in-cabin digital entertainment solutions to the aviation industry in the United States and internationally. This company is in a frontier industry, connecting to the internet in flight is a new concept. This stock is actively traded, over 1 million shares per day. However, when news breaks of new legislation or contracts won, the stock immediately becomes hot.

Short sellers believe this company will eventually go bankrupt, and will profit if this happens. However, as news invariably breaks, shorts become nervous or feel the need to adjust their position. This adds even more volume to the feeding frenzy. GOGO shows over 25% short interest, making it very active for pockets of time.

Hot Stocks Breaking Out

Periods of activity arrive fast and furious in hot stocks. They tend to wane as fast as they came in. Below, we will discuss some stocks that are ripe for activity- having been active before, and have since slowed.

Riot Blockchain, Inc (NASDAQ : RIOT) develops enhanced surface plasmon resonance technology platform for the detection of molecular interactions. This company changed their name during the cryptocurrency boom. They are listed as a biotech company, but claim to incorporate the blockchain technology in their process. This hot stock has an eye popping 52 week range from $3 – $46.

Furthermore, the stock has a relatively low float, approximately 6 million shares. With 30% short interest, it is no wonder that the name can become hot at any time. This shows traders that even a small piece of news such as changing company names can make names active and create profitable opportunities.

Snap Inc. (NYSE : SNAP) operates as a camera company. It offers Snapchat, a camera application that helps people to communicate through short videos and images. Investors debate whether this company has longevity, making it a hot stock in the market. Some believe the same argument was made for Facebook, Inc  (NASDAQ : FB), which is now one of the top stocks in the market.

This heated debate is the foundation for activity in this name. Is closely monitored and moves violently on news releases. If a trader wishes to play SNAP, he pays attention to quarterly reports and tech conventions where information shared about the company. The name shows almost 20% short interest, causing it to become hot on such news breaks.

Hot Biotech Stocks

Unfortunately, disease always exists in the world. However, well-financed and managed companies are finding new cures every day. Companies look to the financial markets to raise money for operations. The most successful companies often have the most hot stocks. It is important to read news releases, as they can turn an illiquid, dead name into an active oasis for traders.

Moleculin Biotech, Inc (NASDAQ : MBRX) a preclinical-stage pharmaceutical company, focuses on the development of anti-cancer drug candidates. Cancer drugs developers often see sustained moves as news tends to roll in, one report after the next. As a treatment passes through various stages of testing, the stock will react accordingly.

Traders speculate that as each treatment is approved, the company comes closer to being purchased for a premium. This causes the price bid higher as shorts scramble to cover. The stock is still cheap, trading under $5. However, this does not mean it cannot be price at $50 within a short time, as we noted earlier.

AMAG Pharmaceuticals, Inc. (NASDAQ : AMAG)  a biopharmaceutical company, manufactures, develops, and commercializes therapeutics for women’s health, anemia management, and cancer supportive care in the United States. Women’s health is a niche market, allowing only a limited number of participants. This name shows sales growth over the past 5 years of over 50%, solidifying their space in the industry.

Furthermore, this biotech shows relatively large analyst coverage. It is always helpful to get a professional’s opinion on the matter, which is rare in this space. AMAG recently received reassuring news from the FDA regarding one of their drugs. Headlines such as these can keep a stock hot for extended periods of time and provide profit opportunity for traders.

Final Thoughts

Many of the names mentioned here are not familiar to investors. This is precisely what makes them hot stocks to trade. The edge belongs to traders who understand why the stock is moving, and where it is likely to go. As mentioned, it is not uncommon for traders to make their year if a stock becomes hot for a prolonged period.