Adjustment or approaching the end! Bank of America recommends investors to buy US momentum stocks on dips.

Bank of America Corp's trading department suggests that investors should buy US momentum stocks on dips, believing that after a round of profit-taking, the valuation of this sector has fallen to attractive levels and is expected to rebound in the short term. The basket of US momentum stocks compiled by Bank of America Corp has fallen by more than 10% since its peak on June 25th. Previously, investors continued to reduce their risk exposure, and quantitative and systematic trading strategies have also been profitable, leading to the second worst July performance in nearly a decade for the index. However, according to a report released by Bank of America Corp's traders last week, based on historical experience, this round of adjustment may be nearing its end. Data shows that in the past, whenever the cumulative decline of the momentum stock basket exceeded 10%, the average rebound in the following month was around 5%. Bank of America Corp believes that seasonal factors are also likely to act as a catalyst for the sector's rebound. Over the past 10 years, August has been the best month for the US momentum stock basket. Currently, the basket mainly holds stocks such as SanDisk (SNDK.US), Micron Technology, Inc. (MU.US), Danaher Corporation (DHR.US), Coinbase (COIN.US), and AMD (AMD.US). Bank of America Corp traders state that looking at historical seasonal patterns, previous instances of momentum stock pullbacks, and risk-reward characteristics after significant declines, the current situation appears more like a continued profit-taking phase rather than a fundamental shift in market style, indicating that the sector may be nearing a turning point. The report points out that from a statistical perspective, the current weak trend suggests that there may be a good entry opportunity in the short term. Other Wall Street institutions have also expressed similar views. UBS Group AG's trading department mentioned earlier this week that the downtrend in momentum stocks may be nearing its end, and investors can start reshuffling in the artificial intelligence and semiconductor sectors. In terms of specific strategies, Bank of America Corp recommends that investors allocate to the US High Momentum Index or the US Technology, Media, and Communications High Momentum Index through total return swaps or call options expiring in August. Bank of America Corp traders also noted that historical data shows that past adjustments in momentum stocks in the third quarter typically bottom out around the end of July, followed by a rebound phase that usually coincides with the peak period of earnings reports from listed companies. The report states that if history repeats itself, the market's repricing of momentum stocks is likely to gradually manifest around the end of the month.