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Power Play: Rise of momentum stocks

Boxes move along a conveyor belt at an Amazon fulfillment center in Tracy, California.
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Boxes move along a conveyor belt at an Amazon fulfillment center in Tracy, California.

The Dow, Nasdaq and S&P 500 are on track to post a positive week and a positive July, but several momentum stocks have done even better this past month.

Hugh Johnson, chairman and chief investment officer at Hugh Johnson Advisors, tells CNBC's "Power Lunch" on Friday there have been a few earnings surprises and significant reactions in the stock price, especially for Google, Netflix and Amazon. The stocks surged 20 percent in July, outperforming the major averages.

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"In all three cases (and there are more) there is both earnings momentum and stock price momentum (driven by earnings momentum). That kind of thing seems to work in [the] current environment," Johnson said.

But Johnson warns investing in momentum stocks does come with a risk. "You need to be very careful. Momentum works both ways," Johnson said.

Google is lower during trading, but Netfix and Amazon are both higher.