Last week I discussed how tracking the leading big-cap momentum stocks could provide good insight into the health of the overall market. These stocks, Yelp (YELP), Jazz Pharmaceuticals (JAZZ), Canadian Solar (CSIQ) and YY Inc. (YY), which I call the new Four Horsemen, continue to act strongly and are giving few hints that the market is topping.
In addition to tracking key individual stocks, it is extremely important to track the leading market sectors. Market players often underestimate how long a hot group can lead the market. Not only does the action of the sector provide insight into market health, it is also fertile ground for finding good stock picks.
Some of the leading sectors in the market are represented by the Four Horseman: JAZZ reflects the strength in biotechnology, YY represents the very strong China Internet group, Yelp is in the social media group, and CSIQ is a key stock in the solar-energy sector.
Solar energy is a group that has been leading for a number of months and I believe it is going to continue performing well in 2014. Names in the group that are on my watch list include SunPower (SPWR), SolarCity (SCTY), JinkoSolar (JKS), First Solar (FSLR), Real Goods Solar (RSOL), JA Solar (JASO), Trina Solar (TSL), SunEdison (SUNE) and Yingli Green Energy (YGE).
Finding the leading groups and digging through their components is an excellent way to find new picks. The key is to monitor them closely as the charts develop and then act aggressively when the time is right. I'm tracking the above-mentioned stocks closely and looking for entry points. Some of their charts look ready to move in the near future: