Straegy: Follow the Leader

April 1, 2022, 12:50 pm EDT

Follow the Leader

If you are new to learning a new thing, like investment or trading, the starting point should be to follow the leader. Of course, we need to identify who is the leader. 

The stock market will identify leaders automatically. When a stock emerges from a base or consolidation to make a breakout, it shows itself the power to lead. Especially, if the stock market is shaky or weak, its leadership manifests from its performance rather than opinion. 

Here is an example in our article: 03/08 Stock Picks: Let’s Go, Discount Supermarket for Grocery Outlet (GO). We can see GO began to show its strength in the beginning of March around the 28-29 range. After our introduction, GO made a little pullback to retest 28 as support. After that, it continues to rally regardless of the market conditions. Even yesterday -550 drops in the Dow Jones index or today all red markets, GO continues to thrive. It already made +10% from 30 or +18% from 28 levels in a few weeks. 

The relative strength of GO is visible and documented. Although the supermarket industry belongs to defensive types, investors look for a major trend for months or years to come. Solid fundamental and demanding industry for inflation era, affordable food source seems a good place to invest. 

Therefore, it is important to check who is leading the market by making a new high or breaking out from a base. If we know how to find the leaders and follow the leaders, we shall have a better chance to make more profitable trades. 

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