Yesterday, I talked about how the biggest gains come before stocks become the dominant market leaders.
So for today, let’s look at a chart that underlines why identifying these emerging market leaders can be so challenging.
Chart of the Day
This chart shows how many of the 30 largest stocks in the S&P 500 now were already in the top 30 years ago.
And as you can see, if we rewind the clock to just 10 years – only about half of the current top 30 were in that league back then.
Yes, many of the dominant market leaders can stay in their spots for a LONG time…
But most traders vastly underestimate how fast leadership changes…
Which is what makes targeting the emerging market leaders so difficult.
But to effectively do that, we have to ask ourselves the right question…
Which I explain below.
Insight of the Day
The right question – what CREATES these market leaders in the first place?
You could argue that what creates market leaders is a powerful competitive advantage – such as Nvidia’s GPU chips.
In a certain sense, you would be right.
But from the perspective of a trader, there’s only one thing that creates market leaders…
And that’s BUYERS.
The only way for a stock to become a market leader is for there to be more and more buyers pouring in…
Which means if you know how to spot when the buyers are coming in – you can ride the stock straight to the top.
And this “weird” chart pattern right here shows you exactly when these big buyers are flooding in.
Ross Givens
Editor, Stock Surge Daily
