New bull market creates new market leaders | stockbee


New bull market creates new market leaders

The markets are attempting to form a range here. The buyers stepped in near range low and that range might continue for some time.

The volatility continues to be high. Volatility needs to drop for a sustained bottom. Absent that it is day trader's market.

The breadth trends continue to be bearish. We need to see the big selling days to drop off and daily breadth numbers to drop below 300 for market to consolidate. A 10 to 20 days period like that will create many buyable setups.

Stocks need time to set themselves. As of now not many setups are showing up. If the range breaks down then we will get more short setups.

Big buying opportunities come after market correction. Every time this market has corrected 10% plus since 2009  it has been good buy opportunity.

The momentum based swing trading methods work best when markets rally after such correction. This is the time to run your momentum scans and start looking at possible candidates setting up for next phase.

New bull market creates new market leaders and the new leaders tend to start emerging right at the beginning of new move. The old leaders seldom lead the new move. But most people get fixated on the old leaders and expect them to rally.

The best way to find new leaders is to look at top 300 stocks by relative strength. You can look at stocks using both longer (one year)and shorter (one quarter) term relative strength. Some longer term relative strength leaders undergo orderly correction and they break out at beginning of new move. But many new leaders you will find by using shorter term relative strength at the beginning of new bull moves. A shorter term relative strength based on 40 days or 65 days data can quickly identify a stock that is not showing up on longer term relative strength scans.

Another useful tool to find new leaders is to create a relative strength scan based on recent lows. This kind of scan uses a lowest low of 65 or 90 or 180 days to calculate relative strength (Stockbee Double Trouble scan is based on that concept).

The stocks that IPOed in last 6 month to one year are another source of new leadership and you must have way to monitor IPO daily.

One of the traps many people fall in to is that they become too bearish near bottom and are not mentally ready for start of new bull move. Some continue to short the market when it starts rallying. Some get so convinced of the bearish propaganda that they start believing market is going to go down a lot. That is why you need timing tools which will tell you when the trend has changed.


blog_toscano said...

HANS is a stock that made a nice breakout. I'd like a pull back to buy it or a consolidation while general market breath improves.
Also ITC isn't bad

MP said...

how do you determine market leaders ?

Pradeep Bonde said...

Momentum ranking tells you which stock or sector is market leader. Sectors and stocks are ranked by momentum everyday and those in Top 5% by rank are current leaders. There are many ways to calculate momentum ranks.