During choppy stock market environments, it can be easy to tune out the daily market action. But it is just when indexes are struggling that the stock market leaders separate themselves.
As it turns out, you can find many of the stock market's leaders while the indexes are still weak or in the early stages of a new uptrend.
Currently, IBD's market outlook is "uptrend under pressure," according IBD's The Big Picture. During an "uptrend under pressure," investors should be playing a ton of defense. Instead of looking for new breakouts, you should have a game plan for your existing positions. Make sure you have an exit strategy in a market that now shows little ability to rebound. If the market is able to rally, then it would be time to look for breakouts and add exposure.
The best way to find emerging stock market leadership is by using the relative strength line. The RS line measures a stock's price performance vs. the S&P 500. If the stock is outperforming the broader market, the RS line angles upward. If a stock lags the broad market, the line will point lower.
The RS line is plotted on all IBD and MarketSmith charts. In addition, the IBD Stock Screener includes a list of top-rated stocks with relative strength lines at new highs.
MarketSmith also has the "RS Blue Line Dot" list, which screens for RS lines at new highs. Other useful MarketSmith lists to use during weaker markets are "Breaking Out Today" and "Near Pivot." These stocks are attempting to move higher despite market pressure. The latter shows stocks nearing buy points in bases, and the other highlights stocks topping buy points.
Starting Monday, MarketSmith is providing free access for a full week. Investors can try out the blue line dot and other tools in this premium product at no charge.
During the 2018 stock market rally, the IBD MarketSmith RS Blue Line Dot triggered on the breakouts of Apple and Netflix, reiterating them as market leaders.
MarketSmith is available for free starting Monday though Sept. 18. No credit card required.
On May 4, 2018, Apple stock broke out past a double-bottom's 179.04 buy point. The iPhone maker went on to rally 30% to its high price on Oct. 3, 2018.
Netflix broke out past a 338.92 buy point in a flat base on May 23, 2018. Less than one month later, the streaming giant hit the 20%-25% profit-taking zone.
2022 Energy Stock Leaders
During January, many energy leaders boasted RS lines at new highs just as they broke out past buy points, including Diamondback Energy, EOG Resources and Pioneer Natural Resources. That was a sign of the sector's emerging leadership.
On Jan. 4, Diamondback shares broke out past a 116.97 consolidation entry. In just over five months, shares had rallied as much as 37% to their June 8 peak price.
Pioneer Natural Resources staged a breakout past a 197.04 buy point on Jan. 6. Shares peaked on May 31, more than 46% above the entry.
EOG Resources broke out past a cup with handle on Jan. 11. As the illustration shows, its RS line hit new highs along with the breakout past the 91.74 buy point. The oil and gas producer advanced more than 60% to its high on June 8.
How To Find New Stock Market Leaders
A few potential stock market leaders have emerged, including IBD Leaderboard watchlist stock DoubleVerify, Enphase Energy and Ulta Beauty. All three have RS lines at or near new highs, as the stock market tries to battle back.
DoubleVerify is building a bottoming base with a 28.07 buy point, per IBD Leaderboard analysis. The company specializes in platforms to help advertisers get a better view on the effectiveness of their ad spending and campaigns.
Enphase Energy hit a new high Thursday and is trending sharply above its rising 50-day moving average. The company is a leading provider of solar microinverters. Microinverters boost solar energy production, improve reliability in solar energy systems and support intelligent energy management.
Ulta Beauty has broken out of a double-bottom base and is extended above the 5% buy range. Ulta Beauty is the largest beauty retailer in the U.S., with more than 1,300 stores.
Keep an eye on Stock Market Today columns and The Big Picture. Both will highlight stocks in new buy zones, as well as daily market commentary. Also, check the IBD Stock Lists.
