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Trade like a stock market wizard

Follow The Leaders

Most of the huge profits made in bull markets come in the early stages of the first 12-18 months. Top-performing stocks lead the extensive market averages at significant turning points. These market leaders also foretell the downside turn.


More than 90% of super performance stocks originate from bear markets and common market corrections. The key lies in doing your homework while the market is down because it will help you to reap huge money when it turns up. 


If the major market indices neglect an exceedingly overbought situation after a bear market decline and your list of leaders widens, this should be perceived as a sign of strength.


The stocks that sustain well and rally from the market low during the first 4 to 8 weeks of a new bull market are the true market leaders. They are capable of progressing reasonably.


It’s important to carefully review the price action of companies with recent optimistic developments and strong EPS during main market declines.


Each market cycle has a distinct form of price and volume action. A large number of stocks that exhibit positive price behaviour during a general market decline can hint at the point where the next market leaders will appear or what stocks are likely to take off first when the market begins to rally. 


When you see this kind of price action, you should tune out the media and concentrate on the facts like price, volume, sales, earnings, profit margins, new products and positive industry transformations. Look for the confirmation in each stock and assign the best criteria.


Many times there will be more than one stock in an industry that displays this kind of behaviour. You should own the top one, two, or three names in that industry. Look for the kinds of patterns and price action that are multiplying in the market. This will help you understand what trick will work best in the existing cycle.


When a market bottoms, the best stocks make their lows before the market average low. As the broader market averages make lower lows, the leaders deviate and make higher lows.


Mark believes in buying strength and not weakness. True market leaders always show better relative strength especially during a market correction.


The leaders of the former bull market rarely lead the next rally, so expect to see new names. Less than 25% of leaders of a cycle commonly lead the next cycle.


With each bull market, old leaders step aside and new ones emerge. Be prepared to act quickly. Most importantly, stop paying attention to the media and start focusing on the leaders.

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Units 10/14