JchartUpdates uses the exponential regression formula described in Andreas Clenow’s Stocks on the Move to define and rank momentum. Exponential regression is a linear regression calculated using a natural log of closing prices.

The slope is the momentum of prices and expresses the percent gain per day. It measures the direction and velocity of the stocks movement. The percent per day is annualized to give a percent gain per year.

Annualized Daily Percent = (1 + daily percent)^ 250

This number gives us an easy way to determine what percent per year a stock movement is explained by the current slope.

R2 measures the fitness of prices to the regression line. It ranges from zero to one with a value of one being the best fit. The objective is to rank stocks with the highest slope and the best fit to the regression line. This is done by multiplying the Annualized Daily Percent by R2. The resulting values are sorted from highest to lowest. The highest ranked stock has a ranking of one.

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