The MAG7 Increasing Momentum Strategy is a systematic trading approach designed to select and trade stocks within the Magnificent 7 (MAG7) group based on increasing momentum. This strategy identifies stocks with the highest momentum increase over the last week to capture short-term market opportunities.

Q-Score Momentum Model

The Q-Score Momentum Model reflects the underlying trend strength of an asset. Our proprietary quant models analyze price action and technical indicators to determine whether an asset exhibits bullish or bearish momentum.

A higher momentum score suggests strong positive price action, while a lower score indicates weakness or potential downside pressure. Traders can use this score to align their positions with prevailing market trends. Our model assigns a score ranging from 0 to 5:

  • 0: Bearish Momentum
  • 3: Neutral Momentum
  • 5: Bullish Momentum

You can read more about our Q-Score in our dedicated Guide.

MAG7 Increasing Momentum Strategy - Q Score Momentum
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Asset Universe

The strategy focuses on the following MAG7 stocks:

  • AAPL (Apple)
  • MSFT (Microsoft)
  • AMZN (Amazon)
  • NVDA (Nvidia)
  • GOOGL (Alphabet)
  • TSLA (Tesla)
  • META (Meta Platforms)

Strategy Rules

Entry Conditions:

  • Filter MAG7 stocks where the momentum score today is higher than the momentum score one week ago.
  • Rank selected stocks based on the difference in momentum score and choose the stock with the highest difference.
  • If multiple stocks have the same momentum difference, select the one with the highest average return over the last 3 months.
  • Buy at the market open.

Exit Conditions:

  • Sell at the market open the next day unless the same stock remains the top pick.
  • If no stocks meet the entry conditions, no position is taken.

Trading Costs:

  • $2 per trade (total of $4 per round trip).

Backtesting Period:

  • January 1, 2019 – January 31, 2025

Initial Capital:

  • $100,000

Performance Summary

Let’s look at the historical backtest of this strategy and look at the performance versus the Benchmark (S&P 500 Index).

MAG7 Increasing Momentum Strategy - MAG7 Strat 4 Performance 1
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Here are some Key Metrics.

MAG7 Increasing Momentum Strategy - MAG7 Strat 4 Key Metrics 1
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We can also look at the return distribution across years comparing this with the SPX.

  • The MAG7 Increasing Momentum Strategy significantly outperforms the SPX benchmark, achieving a much higher cumulative return and CAGR (52.57%).
  • Despite its higher volatility (52.59% annualized), the Sharpe (1.43) and Sortino (2.24) ratios indicate strong risk-adjusted returns.
  • The drawdown (-58.78%) is higher than SPX but the strategy recovers quickly and maintains strong profitability.
  • The strategy performed exceptionally well in 2020 (154.07%) and 2024 (264.78%), capitalizing on strong momentum trends
  • The ability to recover quickly from drawdowns suggests resilience in strong market conditions.
MAG7 Increasing Momentum Strategy - MAG7 Strat 4 Annual Return 1
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And finally let’s look at the distribution of returns by month historically.

MAG7 Increasing Momentum Strategy - MAG7 Strat 4 Seasonality Return 1
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Sensitivity to Initial Capital

The strategy was tested with varying capital levels to evaluate its robustness. Larger capital allocations help mitigate the negative effects of commission costs, leading to more stable and consistent performance over time. Performance across different capital allocations is detailed below.

MAG7 Increasing Momentum Strategy - MAG7 Strat 4 Sensitivity 1
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