There are so many different stocks that traders and investors follow and trade each day. When markets trade higher week after week this is known as an up-trend. When a trend is established it will usually have several stocks that will lead the pace in the market. These days the primary market leaders are Apple Inc (AAPL), Alphabet Inc (GOOG), Microsoft Corp (MSFT) and Tesla Inc (TSLA).
The one thing these stocks have in common is that they are continuously making new highs on the daily, weekly and monthly charts. As long as these stocks keep surging higher and remain in an up-trend the market is usually going to be fine. Should these stocks start to roll over or fall below their 50-day moving average then it is usually a sign that there could be problems with the overall market. This happens because the leaders get most of the new capital or money from the big financial institutions. When theses leading stocks decline or pullback it tells us that money is no longer keeping these stocks elevated. It usually takes investors a while to figure out what to do next with their money. This is why it is so important to just follow a few market leaders even if you do not trade any of these stocks.
There are always going to be new stock leaders that will emerge over time. It will be important to track these stocks as well, especially when the big institutional money is flowing into these equities. So do not be afraid to add new leaders to your list. This is easy to do by checking the new high list every week to see if some new company should be added to the leadership list. I personally only add stocks to my leadership list that trade over 1 million shares a day. This will keep the list solid as you just want to follow the big institutional money and not the fast retail money.
Remember, if the market leading stocks fall then it is a sure sign that the current trend or rally could be in trouble. Test this out for yourself over the next few quarters and I think the results will speak for itself.
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