Get a Handle on the New Leaders

 | Jun 16, 2012 | 4:45 PM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:












Bull markets are defined by the movement of leading stocks as they rise and take their place at the top of the heap. Market leadership is needed for movement in both directions, but most usually recognize when the upside leaders are visible. Looking at some charts from early May, it's not hard to find the ones leading the market lower -- just pick any names in the energy area, technology, banks or industrials or even transports.

The broad market decline from early May was concentrated in broad groups -- it was hard to find any name that wasn't going down. The prior instance saw strong leadership on the way up, and many in this group were technology, such as Apple (AAPL), Priceline (PCLN) and Amazon (AMZN). But, this time around, we are seeing new leaders emerge, and that is typical of rotation.

The process here is that fresh money comes in to names with good earnings growth and other positive fundamental metrics -- and that, in turn, improves chart and technical patterns. Some of the best patterns appear in names you may not even know about, but which you'll probably be familiar with soon enough. If this market breaks out of a range, these names -- not the old guard -- are those that are likely to lead the market higher.

Some of the recent leaders, such as Google (GOOG), Qualcomm (QCOM), Tiffany (TIF), Fossil (FOSL), JPMorgan Chase (JPM), Baidu (BIDU), U.S. Bancorp (USB), (CRM) and Lululemon (LULU) will not lead the next rally. Names like Whole Foods (WFMI), Athenahealth (ATHN), Cerner (CERN), eBay (EBAY), General Electric (GE), Clorox (CLX) and Dunkin' Brands (DNKN) have emerged as strong stocks winning institutional sponsorship. While these stocks are at or near all time highs, they are exhibiting the type of behavior indicative of quality moves.

We can argue all day about buying low and selling high vs. buying high and selling higher. This is a market fed on liquidity, so buying when others are buying (or where money is flowing) is a good bet. We may see more liquidity helicopter drops by other central banks soon enough, and these would undoubtedly find their way in to the equity markets. Some of the better-looking charts are below. See the common patterns of breakouts on higher volume, and you will understand why these are poised to lead.

Whole Foods (WFM) -- Daily
Athenahealth (ATHN) -- Daily
Dunkin' Brands (DNKN) -- Daily

As always, I would love to read your comments!

Columnist Conversations

today is a good day to lighten the load and take some positions off the table. SOLD WB OCT 85 CALL AT 11 (i...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
View Chart »  View in New Window »



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.