The AfterPay Touch Group Ltd (ASX: APT) share price ended Friday at a weekly high of $20.95 and is back at levels it has not hit since August 2018 in a price move that is likely to fuel the bullishness of technical or momentum traders in particular.
Although technical or momentum trading is not a sound investing strategy it is a popular one with many traders looking at moving average or relative strength indicators of stocks to do decide whether to buy or sell.
For example if a share like AfterPay breaks its 10, 50, 100 or 200-day moving average price to the upside or downside traders may take that as a buy or sell signal.
Be warned though as even the identifier of gravity Sir Isaac Newton lost almost his entire net worth on buying up stock in the South Sea Company bubble – before the stock collapsed in 1720.
And while the maths involved in calculating a 200-day moving average may trouble some readers, it's not likely to have troubled Sir Isaac Newton.
As such I'd suggest you forget the technicals of short-term trading to focus on the fundamental growth prospects of the buy-now-pay-later sector in Australia the US and UK.
Foolish takeaway
AfterPay now has nearly a $4.9 billion valuation so it's not going to smoke out the value investors, although those prepared to take on more risk may be rewarded with huge gains if AfterPay turns out to be the real deal as a disruptor in the consumer credit space.
For now I'm sitting on the fence and calling it a hold on valuation grounds, but I expect we could see a record high on the back of possible March quarter trading update later next month.
