Fund managers were giving up on growth stocks back in March…

The switch to value was in full swing. But as I noted in DailyWealth last month, joining the rush to value was probably not a good idea. Growth stocks were set to keep outperforming.

Since then, growth stocks are up 7%, while value stocks are up 2%. Importantly, this latest rally can continue… because growth stocks have entered a rare setup along the way.

The iShares Russell 1000 Growth Fund (IWF) rallied nine days in a row earlier this month. And buying after this kind of setup can lead to double-digit gains.

Let me explain…

Seeing a string of consecutive up days might seem irrelevant. But it’s not…

Stocks that go up tend to keep going up in the short term. And stocks that are falling often keep falling.

This kind of setup is an extension of that idea. It tells us when an uptrend is starting to “break out” to its next phase. And these setups can signal when a trend is accelerating.

Today, we are seeing that happen in growth stocks. IWF strung together nine up days in a row earlier this month. Take a look…

After falling in March, IWF has bounced back sharply. It’s now back in a strong uptrend. And we can see a string of up days on the chart as well.

A nine-day rally in IWF is pretty darn rare. So to get a good data set over the last 20 years, I looked at every time IWF rallied eight-plus days in a row. Since 2000, similar setups have led to solid outperformance. Check it out…

Growth stocks have done well over the past 20 years… returning 7.4% annualized gains. But buying after today’s setup can lead to even better results…

Similar instances resulted in 5.4% gains in six months and a 9.8% gain over the next year. Those are the typical gains you can expect with a setup like we’re seeing today.

That’s not the top of the possible range, either. IWF has rallied as much as 25.7% in a year after this kind of up-day setup. That’s an impressive return.

In short, growth stocks have big upside potential over the next year. And shares of IWF are a simple way to make the trade.

Good investing,

Chris Igou

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Source: Daily Wealth