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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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