Stock Market Leadership

Stock Market Leadership

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Stocks that act well while the Market is selling off may give you a clue to new Leadership

Over the past few years many investors have given up on the market especially when another round of selling has occurred. However this is exactly the wrong time to give up on the market because when the market reverses to the upside those stocks which had been acting well during the sell off may become the next big winners.

Here are a few examples of what I’m talking about. Let us compare the charts of HITK and USNA with the chart of the S&P 500 this past Summer and Fall when the market was selling off.

Looking at HITK first shows that this past Summer and Fall while the S&P 500 was dropping (points A to B) HITK was actually rising (points C to D) while completing the right side of a 1 1/2 year Cup. HITK then traded sideways for 4 weeks while developing a Handle (point E) and then broke out in late October. After breaking out HITK nearly doubled in price over the next few months before topping out in early January.

Now let us compare USNA with the S&P 500. USNA formed a 2 1/2 year Cup from the early part of 2000 until June of 2002. When the S&P 500 began to sell off last Summer and Fall USNA basically traded sideways during that period of time while developing a 4 month Handle from July through September. Then when the market made a bottom in early October and began to rally USNA broke out of its Handle on huge volume (point F). After breaking out in early October USNA then doubled in price over the next three months.

As you can see noticing which stocks are acting well when the market is selling off can give you a clue to whom the next leaders will be when the market begins to reverse strongly to the upside.

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