Finding Leading Stocks

When Low Short-Term Relative Strength Is Actually Bullish (Most Traders Get This Wrong)

A lot of traders misunderstand what they’re seeing when they sort stocks by Relative Strength.

When a stock is ripping higher, you’ll usually see strong RS across nearly every timeframe: 1-year, 6-month, 3-month, 1-month, even 1-week.

But that’s also usually when everyone starts saying:

“It’s too extended.”

The more interesting opportunity can appear when a major leader finally starts to consolidate.

In this SNDK example, the stock still had elite longer-term Relative Strength, but its shorter-term RS started falling as price consolidated, found support, volume dried up, and higher lows began forming.

At first glance, that weaker short-term RS might look bearish.

But in the right context, it can be exactly the opposite.

It can be telling you that a powerful leader has finally stopped running long enough to build another potential buying opportunity.

That’s the part many traders miss.

But there’s a catch.

The exact same RS relationship can also appear when a former leader is actually breaking down.

If price loses important moving averages, fails to reclaim them, starts making lower lows, and the overall chart deteriorates, then falling short-term RS may be confirming that the stock’s leadership is ending.

Same Relative Strength readings. Completely different message.

That’s why I never use Relative Strength in isolation.

A screener can help me find the stock.

Price, volume, trend, and the chart tell me what the RS actually means.

This clip comes from a longer video where I walk through some of the exact stock screens I personally use inside MTS Velocity, including how I combine different Relative Strength timeframes, fundamentals, volume, trend, and market context to narrow thousands of stocks down to the names I actually want to study.

The full video and MTS Velocity Stock Screener are available to all paid subscribers.

“If I Screen for High RS, Won’t I Find the Stock After It’s Already Moved?”

This is one of the biggest questions I hear about Relative Strength.

A lot of traders assume that if they screen for stocks with high RS, they’ll be too late.

The thinking goes something like this:

“By the time a stock has a high RS Rating, hasn’t it already made the move? Won’t I miss the setup and breakout?”

But that is exactly what William O’Neil’s research showed was often NOT the case.

From the early 1950s through 2008, the average RS Rating of the best-performing stocks before their major run-ups was 87.

O’Neil went even further and said the really big moneymakers generally had RS Ratings of 90 or higher just before breaking out of their first or second base structure.

That’s the key.

Just before the breakout.

Not after the huge move.

Before it.

WDC is a great example.

Look at the setup in the chart.

WDC had already made a strong advance, then tightened up and formed a very attractive low-risk, high-reward setup.

Using the Historical RS feature in MTS Velocity, I can go back to that exact date and ask:

What was WDC’s one-year Relative Strength Rating before the breakout?

The answer:

90.

It already had a 90 RS Rating while the setup was sitting there.

Then WDC broke out and eventually advanced more than 800% from that area at its peak.

That is the distinction people sometimes miss.

WDC didn’t get a high RS Rating because of the 800% move.

It already had high RS before the 800% move happened.

That is exactly what O’Neil was talking about.

And remember, O’Neil’s RS Rating measures a stock’s price performance against the market over the previous 52 weeks, which is why the one-year RS is the standard measurement here.

My Relative Strength universe is also stricter because I only rank the stocks I’m actually willing to trade. That means WDC’s RS Rating would likely have been even higher in IBD or MarketSurge, which rank against a broader universe.

So a 90 RS inside MTS Velocity is already competing against a relatively strong, tradeable universe.

This is one of the reasons I built Historical RS.

Instead of debating whether high RS means you’re already too late, you can go back to virtually any major winner, set the date to the setup or breakout, and see for yourself.

What was the RS before the move?

WDC: 90.

Then came the 800%+ run.

That’s the point.

The Market Movers Have Looked Very Different All Week

I’m looking at today’s biggest market movers, then running my growth scan and layering in the stocks with the biggest earnings and sales growth.

The picture looks very different from what we’ve become accustomed to seeing.

And it hasn’t just been today.

It’s been happening all week.

ETON: A Growth Name I’m Watching for a Pullback

ETON is a name I’ll be watching closely to see if we get a nice, tight, orderly pullback that could create an attractive entry opportunity.

The stock had a huge gap-up after reporting triple-digit earnings growth, ran higher for several days, and now appears to be pulling back on lighter volume. That is exactly what I like to see following a powerful move.

The fundamentals are strong:

• Quarterly EPS growth: 530%

• Quarterly sales growth: 98%

• Pretax margin: 31%

• ROE: 35%

• Fund ownership increasing quarter over quarter

• 1yr Relative Strength Rating: 97

ETON has the fundamental growth characteristics we look for and has also been a strong performer coming off the July 29 lows.

This is a great CANSLIM name outside many of the AI-related areas that have recently started showing trouble again. Although many of those stocks made powerful moves off the July 29 lows, several have struggled to return to their previous highs. Many that did make it back have struggled to break out successfully.

Now I want to see if ETON can pull back on light volume with tight price action, potentially setting up a low-risk, high-reward entry opportunity.

Before the Breakout: Why AUGO Was Already on My Radar

Strong group. Explosive fundamentals. Great price and volume.

Big move today in metals and miners.

One of the stocks I mentioned in the Big Picture two weeks ago was AUGO. Why did I mention it?

First, since the July 29 lows, we have seen strength in metals and miners, along with many of the groups that led in April and May.

Next, AUGO had triple-digit earnings growth, double-digit sales growth, rapidly growing fund ownership, a one-year Relative Strength Rating of 95, and strong relative strength across the shorter time frames. It was also a name I was watching back in 2025 when metals and miners were performing extremely well.

Combine that with a powerful earnings gap above all its key moving averages, followed by a strong run higher and then a tight consolidation lasting a little over a week. Price found support at the 10-day moving average while volume dried up.

Today, volume rapidly came into the stock. AUGO cleared the consolidation high near $80 at the open and then triggered an opening range breakout around $81.22. Using the low of the day near $79.70 as the stop allowed the trade to be executed with less than 2% risk.

When a breakout through a prior high aligns with an opening range breakout, it can create a much higher-quality setup with a precise entry and tightly defined risk.

We identified a strong industry group within a supportive market environment. Then we found one of the strongest stocks in that group. We looked for great earnings and sales growth, excellent pretax margins and ROE, and textbook price and volume action.

The sequence was clear: a powerful move higher on heavy volume, volume drying up as price consolidated tightly, and then massive volume coming into the stock as it broke out today.

This is a great demonstration of how we use the MTS Velocity trading software to identify growth stock candidates and then apply the setups we teach in the MTS Course. These principles have been used by some of the world’s most successful growth and momentum traders, including William O’Neil, Mark Minervini, Dan Zanger, and Kristjan Kullamägi.

William O’Neil’s First Real Discovery Was the Exact Opposite of “Buy Low”

Most investors are taught the same thing:

Buy low. Sell high.

William O’Neil discovered something very different.

In 1959, O’Neil studied the Dreyfus Fund, which at the time was dramatically outperforming its competitors.

He obtained the fund’s reports, plotted more than 100 of its stock purchases on charts, and laid them all out in front of him.

Then he noticed something that changed the way he looked at stocks forever:

“Every single stock had been bought when it went to a new high price.”

Not some.

Not most.

Every single one.

This Price Action Is Beautiful!!!

Check out NESR.

This is exactly the kind of setup I love to see.

Strong move higher, followed by tight price compression right at the highs as volume dries up. Higher lows continue pressing into resistance, and now price is sitting just beneath the breakout level.

What I’d love to see Monday: a decisive push through the highs on heavy volume.

And this is the type of trade where I don’t mind being wrong. The setup is tight, the risk is clearly defined, and I can keep my stop close.

The fundamentals are there too:

• Triple-digit earnings growth.

• Double-digit sales growth.

• Fund ownership increasing quarter after quarter.

• RS near the top of the market.

Explosive upside move. Price tightens during the pause. Strong growth fundamentals. All the ingredients for another powerful move higher.

The Right Setup in the Wrong Stock Is Still the Wrong Trade

Most traders obsess over entries.

And yes, a great entry with proper risk management and position sizing is important, but none of that does you much good if you’re trading the wrong ticker.

I’ve seen plenty of traders struggle simply because they keep trying to trade dead names.

Stocks with no real relative strength. Weak industry groups. Nothing actually moving.

That’s why I track relative strength so closely.

Your odds improve dramatically when you’re trading the strongest stocks in the strongest areas of the market. You’re no longer trying to force something to happen. You’re putting yourself where the money is already flowing.

Nothing is guaranteed in the markets. It’s a game of probabilities, but you can increase those probabilities by making sure you’re trading the right names in the right industry groups.

This is why one of the most important tools we use is our stock screening software.

It helps us quickly find where the strength is so we can spend our time looking for setups in the stocks that are actually moving.

There are a lot of pieces that go into creating positive expectancy in the market.

Stock selection is one of them.

ATRO Breaking Out to New Highs!

This Is One of My Favorite Price Patterns to Watch

SNDK is showing up near the top of today’s market mover scan.

Big earnings growth. Big sales growth. Strong relative strength. And now the price action is starting to get interesting.

Look at the chart.

SNDK put in a low, rallied, pulled back without making a new low, and formed a higher low.

Today it pushed above the August 4 swing high, giving us the next higher high.

Higher low → Higher high.

This is one of my favorite patterns to watch because I’m not trying to guess the exact bottom. I want price to start showing me evidence that the trend may be changing.

There are still plenty of reasons to remain patient.

The stock is still below its 50-day moving average, and I would like to see more volume coming into the advance.

And this stock has a lot of work left to do.

From around current prices, SNDK would still need to climb more than 50% just to get back to its June highs.

So I’m not saying the stock is suddenly fixed or that it has to go back to the highs.

I’m simply saying:

This is the type of price action that gets my attention.

Strong fundamentals get the stock on my radar.

Price has to earn the trade.

Sometimes You Just Need to Keep It Simple

Look at the sales growth on NBIS.

It’s a high-relative-strength stock outperforming the major indexes and almost every stock in the market.

But why?

Quarter after quarter of triple-digit sales growth. And now look directly below it: fund ownership has been climbing dramatically right alongside it.

That’s not a coincidence.

We can make growth investing incredibly complicated with dozens of indicators, ratios, screens, and opinions.

But sometimes the question is much simpler:

If you’re looking for growth stocks, what tells you whether a company is actually growing?

Sales.

And not just one great quarter. You want rapid, sustained sales growth quarter after quarter.

NBIS has been putting up extraordinary numbers, with sales growth repeatedly running into the triple digits. At the same time, the number of funds owning the stock has climbed from roughly 100 to more than 800.

Institutions are noticing.

Sometimes the biggest opportunities are sitting right in front of us in the numbers.

Find the growth. Follow the strength. Then let price tell you when to act.

Why Would You Buy a Stock at New Highs?

“I want to buy it as soon as it goes to new highs.”

—David Ryan, Market Wizards, three-time U.S. Investing Champion and William O’Neil protégé

This is one of the hardest concepts for newer traders to understand.

A stock making new highs feels expensive.

So instead, people naturally want to buy the stock that is down 30%, 40%, or 50% because it looks “cheap.”

But growth stock traders like David Ryan learned to think differently.

A stock breaking into new highs is telling you something important: demand is strong enough to absorb all the available supply and push price into territory where virtually everyone who owns it is sitting on a profit.

There is no wall of trapped shareholders waiting to “get their money back” as price moves higher.

Of course, that doesn’t mean you blindly buy every stock making a new high.

You still want a company in a strong industry group with big earnings, big sales, strong relative strength, institutional accumulation, and excellent price and volume action.

But when all of those pieces come together, the new high isn’t something to fear.

It’s often the confirmation you’ve been waiting for.

The strongest stocks often won’t give you the comfortable pullback you’re waiting for. They break out to new highs and keep moving higher.

Most Traders Will Notice AEHR After It Breaks Out

The real opportunity is learning to recognize the change before everyone else sees it

AEHR jumped another 10% today, but the move itself is not what has my attention.

This is starting to look like a textbook earnings and sales turnaround story. Earnings went from deeply negative growth to +151% last quarter, while sales accelerated to roughly +40%. More importantly, forward estimates continue to improve. That is exactly the type of fundamental change I want to see.

Institutional ownership is moving in the right direction too, with fund ownership increasing. At the same time, AEHR has surged off the July 29 lows, reclaimed its 50-day moving average, and is now pushing back toward all-time highs.

What makes this even more interesting is that many semiconductor charts are still damaged.

If the group continues to repair, AEHR is showing the characteristics of a stock that could emerge as one of the leaders. Semiconductors have taken the leadership role several times throughout this bull market going back to 2023, so I would not count out another run.

The biggest winners rarely wait until everything looks perfect.

Often, a handful of stocks begin separating themselves first. Fundamentals improve. Relative strength explodes. Institutions begin accumulating shares. Price starts acting differently.

Then everyone notices.

AEHR currently has an 1Yr RS Rating of 98.

This is exactly why I highlighted AEHR in this weekend's Big Picture Market Pulse.

Is PLTR Making a Comeback?

PLTR has been one of the great leaders of this bull market.

From 2023 through 2025, the stock gained more than 2,000%.

But since the fall of 2025, price started telling a different story.

PLTR eventually broke below both the 50-day and 200-day moving averages earlier this year. The earnings story remained strong, but when price breaks down, price is what we follow.

Now things are getting interesting again.

PLTR is back above its key moving averages, pushing back toward its highs, and forward estimates suggest earnings and sales growth may be accelerating again.

That combination has my attention.

The question now is whether PLTR can reestablish itself as a true market leader.

Definitely a name to watch.

The Market Has Flipped the Switch. Now Comes the Hard Part.

The market gave us the signal we were waiting for.

✅ Follow-through day

✅ S&P 500 reached all-time highs last week

✅ Breadth expanded

✅ Major indexes back above key moving averages

But here’s where it gets interesting.

A strong index tape doesn’t automatically mean the next great growth-stock leaders have emerged.

Some of the biggest moves off the July 29 lows are coming from stocks that were previously crushed. Meanwhile, many former leaders are still technically damaged.

So I’m not interested in chasing everything that’s bouncing.

I’m looking for the stocks and industry groups showing real relative strength, strong growth fundamentals, and leadership as this new uptrend develops.

The market gave us the green light.

Now we have to figure out which stocks actually deserve our capital.

At the end of this week’s Big Picture Market Pulse, I shared 10 stocks across several different areas of the market that are standing out as potential leaders.

Full Big Picture breakdown below 👇

https://tradingmomentum.substack.com/p/the-market-just-gave-us-the-signal

HPE Is Showing the Kind of Strength I Want to See

Besides DELL, HPE is another computer hardware name that has held up better than most of the group. It’s up about 4% premarket this morning and has a 93 RS Rating, along with a big improvement in both earnings and sales growth. Definitely one I’m keeping an eye on for continued relative strength.

This Stock Had an 82 RS Rating Before It Ran 225%

One of the biggest misconceptions in momentum trading is that once a stock has a high Relative Strength rating, the move must already be over.

MRVL tells a very different story.

Back in April, the stock broke out of a six-month base. At the time of the breakout, its one-year RS rating was already 82.

If you missed the April 1 breakout on heavy volume into new highs, the stock offered another opportunity on April 17. It formed a tight area with a clearly defined level for placing a stop.

By then, its one-year RS rating had climbed to 90.

From the first entry, MRVL advanced roughly 225%.

From the second entry, it gained nearly 140%.

High relative strength did not mean the move was over.

It was evidence that the stock was already separating itself from the rest of the market.

I have always tracked the RS ratings of stocks at the time I purchased them in my model books, but I wanted traders to be able to study this for themselves, so I created a Historical RS feature.

You can now select any previous date and see exactly what a stock’s Relative Strength rating was at that moment.

What you will discover is that many of the market’s biggest winners already had RS ratings of 80 or higher before their largest advances began.

MU provides an even more dramatic example.

When MU broke out on April 22, its one-year RS rating was already 98.

The stock went on to advance more than 160% from that point.

According to the argument that high RS means the move is already over, MU should have had almost no upside remaining.

The exact opposite happened.

This is not simply something William O’Neil wrote about in How to Make Money in Stocks.

You can go back and see the evidence for yourself.

High RS does not tell you the opportunity is over.

Sometimes, it tells you the real move is just beginning.

Is LITE About to Make a Comeback?

Now That’s Momentum

PLPC

The Stocks Leading Since the July 29 Market Low

I ran a simple relative-strength screen anchored to the market low on July 29, 2026.

No earnings filters. No sales filters. No fundamental requirements. No industry bias.

The only requirement was a 98 or higher Relative Strength Rating since the low.