Notes
What to buy: how to find, screen and rank the strongest stocks and industry groups.
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Let’s Go, Dell.
DELL is exactly the type of growth stock I want to trade.
Strong earnings. Strong sales. Strong relative strength.
DELL also showed clear relative strength during the recent market weakness, holding up far better than many of the stocks that led the prior advance.
Great Fundamentals Do Not Always Make a Great Trade
ANET is a perfect example of a growth stock with strong earnings, strong sales, and impressive growth fundamentals that has still been extremely difficult to trade.
Since last September, the price action has been choppy, whipsawing, and lacking a clean, sustained trend. The stock repeatedly moves higher, reverses, breaks below prior lows, and then rallies again. That type of action can stop traders out even when the longer-term direction is eventually higher.
The only truly clean advance I see was the move from roughly April 8 through April 22. Outside of that brief stretch, the price action has been frustrating and inconsistent.
This is an important reminder that great fundamentals are not enough. A stock can be an outstanding company and still be a terrible trade.
I want strong earnings and sales, but I also want clean price action, clear accumulation, and price action that gives me a logical place to manage risk.
PLTR Back From the Dead
PLTR is up nearly 30% after earnings, exploding higher on massive volume.
Quarterly earnings increased 215%, sales grew 93%, and the stock reclaimed its 50-day and 200-day moving averages in a single session.
After months of weakness and a steep decline from its highs, PLTR just came back to life.
The Old Leaders Are Waking Back Up
The strongest sectors and industry groups since the July 29 low are many of the same areas that led the market over the past year:
Technology
Semiconductors
Electrical Equipment and Parts
Computer Hardware
Electronic Equipment and Parts
Communication Equipment
These areas took a beating after major runs in many of their leading stocks.
We will see whether the market produces a follow-through day today or in the coming days, and whether these groups can reclaim their prior leadership.
Many of the former leaders, including SNDK, MU, BE, CIEN, and PENG, were hit hard and still have significant ground to recover.
But the areas that led before the correction are once again showing some of the strongest relative performance off the lows.
Wait... HP Is Still Alive?
I honestly did not know HP made it out of the 1990s and early 2000s.
Yet here it is, showing up on the screens and trying to remind everyone it still exists.
Sometimes the market finds strength in the last place you would think to look.
A Different Kind of Strength Since Last Wednesday’s Low
Now we will see if the rally attempt earns confirmation with a follow-through day in the coming days.
Using the same scan of liquid stocks with big earnings and sales growth, the leaderboard looks completely different depending on the starting point.
From the June 5 character change through today, the strongest performers have largely come from healthcare, energy, and other less traditional growth areas.
When performance is measured from last Wednesday’s low, however, the list shifts sharply toward semiconductors and beaten down former leaders.
That change is notable, but it is not yet proof that these stocks are back or that a new leadership cycle has begun. Many remain well below their highs. AXTI, for example, had declined nearly 75%. During corrections and bear markets, deeply damaged stocks can produce powerful short term rallies without repairing their longer term trends.
The question now is whether this develops into sustained relative strength, institutional accumulation, or fades as another rebound from oversold levels.
The market still has to provide the evidence. A rally attempt can fail or develop into a legitimate follow through, while genuine leaders must continue separating themselves through superior relative strength and price and volume action.
Same fundamental scan. Different measurement window. Completely different type of stock showing strength. It is a character change worth watching, not a conclusion.
The Best Leaders Often Look Broken Before They Lead Again
A stock’s RS weakening does not automatically mean its leadership run is over.
Strong stocks rarely move straight up. They pull back, correct, build new bases, and sometimes look broken before beginning another major advance.
That is why I continue tracking many current and former leaders even after their weekly or monthly RS weakens.
Over the past year, we saw this repeatedly in semiconductor and memory stocks. Many pulled back to the 50-day moving average, found support, rebuilt their setups, returned to new highs, and made another substantial run.
Traders who immediately removed them from their watchlists missed some of the best opportunities of the year.
However, I would never buy a stock simply because its one-year RS remains strong.
That longer-term rating may still be reflecting what the stock accomplished several months ago. The weekly and monthly RS readings give us a much better picture of whether the stock is currently gaining strength, resting constructively, or beginning to lose leadership.
The real question is whether the stock is undergoing a normal correction within an intact uptrend or showing evidence that its leadership cycle may be ending.
RS alone cannot answer that.
You also have to examine the price structure, moving averages, volume, earnings and sales trends, industry group strength, and how the stock behaves during the pullback.
The current action in many former leaders is noticeably different from some of the earlier resets.
Since the tariff scare in the spring of 2025, many leaders following that recovery found support near their 50-day moving averages and eventually returned to new highs. Coming out of the March 2026 correction, many of the strongest names were also stocks that had led previously, but they generally held up better and did not look as technically damaged.
This time, many semiconductor and memory stocks have fallen below their 50-day moving averages, made lower lows, and moved closer to their 200-day lines.
That is a change in character.
It deserves more caution, but caution does not mean automatically declaring the move over.
MU is a perfect example.
It broke below the 50-day, made a lower low, and looked as though it might continue toward the 200-day. Instead, it repaired the damage, reclaimed its moving averages, returned to new highs, and eventually produced one of the best setups of the year.
The same thing could happen with some of today’s beaten-down leaders.
The goal is not to predict which ones will return. The goal is to keep them on the watchlist and let their price and volume action prove that institutional demand has returned.
Some will reclaim the 50-day, tighten up, rebuild sound bases, and become leaders again.
Others will fail to repair the damage and continue toward Stage 3 or Stage 4. New industries may also emerge and replace some of the groups that have led for the past year.
That is why flexibility and adaptability matters.
Do not become emotionally attached to the old leaders, but do not forget about them either.
Breaking the 50-day puts a stock into prove-it mode. It does not automatically mean the leadership story is over.
Most Traders Look at Price. The Best Look at This.
William O’Neil did not invent relative-strength analysis, but he was one of the most influential investors to make it practical, measurable, and widely accessible to individual traders.
Through Investor’s Business Daily, MarketSmith, and what is now MarketSurge, O’Neil helped popularize the idea of ranking stocks by their price performance relative to the rest of the market.
His Relative Strength Rating became a foundational tool for identifying potential market leaders before they became obvious to everyone else.
His book, How to Make Money in Stocks, is still one of the best places to begin studying growth investing, momentum, earnings growth, institutional demand, relative strength, and overall market direction.
I used MarketSurge for years and eventually built my own software for paid subscribers around many of those same foundational principles.
It includes many of the features I relied on most, along with expanded relative-strength tools, custom lookbacks, anchor-date analysis, historical RS, and multiple timeframe comparisons, all at a much lower price.
Relative strength will not tell you everything.
But once you truly understand how to use it, you will never look at the market the same way again.
Why Doesn’t the RS Scanner Include Every Stock?
A member recently asked why the MTS RS Scanner shows roughly 3,200 stocks when platforms such as TradingView list substantially more.
The difference is intentional.
The purpose of the RS Scanner is not to rank every security that happens to be listed. It is to rank a practical universe of stocks that growth and momentum traders could realistically consider trading.
The current universe requires:
A NASDAQ or NYSE listing
A share price of at least $5
Average daily volume of at least 100,000 shares
A market capitalization of at least $100 million
No OTC securities
Why filter the universe?
Because Relative Strength is only as useful as the stocks being compared.
Including thousands of illiquid penny stocks, dormant securities, and thinly traded microcaps may produce a larger universe, but it does not necessarily produce more useful rankings.
A stock can rise sharply simply because a small amount of buying moves the price. That does not mean it is attracting meaningful institutional demand or becoming the type of sustained market leader most momentum traders are looking for.
The current filters are actually fairly lenient.
William O’Neil often used a minimum share price of $10, while traders such as David Ryan, Mark Minervini, Dan Zanger, and Kristjan Kullamägi generally focus on stocks with far greater liquidity.
The goal is not to rank every stock.
The goal is to rank the stocks momentum traders are most likely to actually trade.
If I Could Only Use One Indicator for the Rest of My Life, It Would Be This
As a momentum trader or growth stock investor, it is hard to beat relative strength.
If I could look at only one thing besides price for the rest of my trading career, it would be RS.
And no, relative strength is not the same thing as RSI.
At the most basic level, a standard one-year RS rating ranks a stock’s price performance over the past 52 weeks against every other stock in the market.
A stock with a 99 RS rating has outperformed 99% of the market. You are looking at one of the strongest-performing stocks over that period.
But relative strength is much more than simply sorting stocks by their one-year rating.
Suppose the market falls 20%, but a stock declines only 10%. That stock is showing relative strength.
If the market is falling or moving sideways while a stock continues advancing, that is relative strength.
You can take the analysis even further by comparing the stock with its sector, industry group, related ETF, and the strongest themes in the market.
Suppose an industry group is up 50%, but the individual stock is up only 30%. The stock may look strong in isolation, but it is actually showing relative weakness compared with its peers.
Why trade the laggard when stronger names exist within the same group?
Why take the additional company-specific risk of owning an individual stock when the sector or theme ETF is outperforming it?
Ideally, I want to see a stock outperforming:
The major indexes
Its sector
Its industry group
The market’s strongest themes
Other stocks across the market
And do not study relative strength only while the market is rising.
Some of the most valuable information appears during corrections.
When the market is falling, which stocks refuse to break down?
Which names hold above support, decline less than their peers, or continue advancing while everything around them weakens?
Strong relative strength during a correction does not guarantee that a stock will become a future market leader.
But it can be one of the biggest signals a momentum trader can find.
O’Neil’s research found that the best-performing stocks already had an average RS rating of 87 before beginning their major advances. In other words, the greatest winners were already outperforming nearly nine out of every ten stocks before their most explosive moves began.
This was not based on a few cherry-picked examples. O’Neil studied more than 1,000 of the market’s greatest winners, spanning more than a century, and specifically examined the degree of relative strength they displayed before their enormous advances.
FIX is a perfect modern example.
The stock turned higher and began making new highs while the broader market was still struggling. It revealed itself before the indexes confirmed the new uptrend, then went on to become a massive winner of more than 1,000%.
That is why relative strength during a correction matters so much.
The future leaders do not always wait for the market to give everyone an obvious signal. Some begin separating from the crowd before the indexes turn higher.
However, there is an important caveat.
When growth stocks are being beaten down, defensive areas will often rise to the top of the RS rankings as investors rotate toward safety.
That does not automatically make those defensive stocks the next major leaders.
When the market recovers and growth stocks begin improving, many of those defensive names quickly disappear from the top of the rankings.
Do not confuse temporary defensive strength with genuine emerging leadership.
Look for growth stocks with strong earnings and sales, improving price and volume action, strong industry-group support, and exceptional relative strength that are already separating from the market.
Strong RS during a correction is not a guarantee.
But it is one of the most important clues that a future market leader may already be emerging.
Anchor Date Relative Strength: Find the Leaders Before Everyone Else
Here are several stocks with strong earnings and sales that have shown high relative strength since the market changed on June 5.
This is where Anchor Date Relative Strength becomes extremely useful.
Traditional RS ratings measure performance over fixed lookback periods, such as one month, three months, six months, or one year.
Anchor Date RS allows you to choose the exact date from which you want to begin measuring relative strength.
For example, selecting June 5, 2026, shows you which stocks have demonstrated the strongest relative performance from June 5 through today.
That is very different from a standard one-month RS rating, which only measures performance over the most recent month.
Why does that matter?
Because markets change, and the strongest stocks under the previous market conditions may not be the stocks leading under the new conditions.
When the character of the market changed on June 5, Anchor Date RS made it possible to isolate the stocks and industry groups that began outperforming from that specific turning point.
The same analysis could have been used after the market bottomed around March 30 and began a new uptrend.
Anchor Date RS tells you which stocks have performed best since the date that matters to you.
The Market Shift Was Hiding in the Screens
One of my favorite scans, and one I ran for years in MarketSurge, is the Big EPS and Sales screen. I now run the same scan inside the Momentum Trading Strategy software.
When you sort the results by one-year relative strength, the familiar leaders dominate: SNDK, MU, LITE, WDC, WTX, TER, etc.
The strongest groups are also the ones we have become accustomed to seeing: semiconductors, computer hardware, telecom, and communications equipment.
But sort the exact same screen by one-month relative strength, and the picture completely changes.
Now you see medical, biotechnology, pharmaceutical, oil and gas, and marine shipping names moving toward the top.
This shift was visible in the individual stock screens weeks ago.
When the indexes, sectors, industry groups, and individual stock screens all begin telling the same story, you are no longer guessing whether leadership is changing.
You are watching it happen in real time.
BTSG Looks Good, but Earnings Are Close
BTSG is another name that has been consistently showing up on my screens. It was appearing last fall as well and continues to display strong relative strength, accelerating earnings, double-digit sales growth, and tightening price action near its highs.
But earnings are only a few days away, which adds significant gap risk.
Not Every Pharma Stock Is Just a Story
LQDA is a healthcare name that has consistently appeared on my screener over the past several months.
What separates it from many speculative biotech and pharmaceutical stocks is that it has the actual earnings and sales growth behind the move.
The fundamentals have been supported by strong price action. LQDA recently reached another all-time high and has been one of the market’s strongest-performing stocks this year.
Now it is gapping up almost 5% in pre-market trading.
The Market Changed on June 5. Your Relative Strength Lookback Should Too.
Most platforms only let you measure relative strength using default timeframes like three months, six months, or one year.
But the market does not change character according to those defaults.
That is why I added custom relative strength lookback periods to the MTS Trading Software Relative Strength Dashboard and Stock Scanner.
For example, the current uptrend began near the March 30 lows. From that point, leadership was dominated by growth, technology, semiconductors, software, and AI-related names.
But the market changed on June 5, when the Nasdaq gapped down and fell roughly 4%.
When we measure relative strength from that exact date, we see a completely different market.
Russell 2000 Value, Russell 1000 Value, equal-weight indexes, and midcaps have moved to the top.
Financials, healthcare, and industrials have led at the sector level.
Pharmaceuticals, insurance, biotech, banks, oil and gas, and real estate have led among industry groups.
The old leaders can still appear strong over longer default timeframes because of gains made earlier in the advance.
Custom lookbacks let you answer a more important question:
What has been leading since the market actually changed?
Leadership changes before most traders notice.
Run the Big Earnings and Big Sales screen, then compare one-year relative strength with one-month relative strength.
The shift is unmistakable.
Many of the stocks that dominated the last year still carry elite long-term RS ratings, but their short-term rankings have collapsed:
SNDK: 1yr RS = 99 / 1m RS = 2
AXTI: 99 to 1
MU: 98 to 10
WDC: 98 to 3
LITE: 98 to 10
CIEN: 97 to 12
At the same time, biotechnology, pharmaceuticals, software, and other emerging groups are moving toward the top of the screen.
That is what leadership rotation looks like in real time.
The market doesn’t send a memo. It leaves clues in relative strength, and industry-group rankings.
What Leader Is Still Standing?
The market looks ugly, but the individual stock scans may look even worse.
Many of the leading stocks from the past year have suffered meaningful technical breakdowns. With SNDK now confirming its breakdown below the 50-day moving average, it joins MU, STX, WDC, and a growing list of former leaders that have lost important support.
Since the market set its low on March 30 and began a new Stage 2 uptrend, which leaders are actually still standing?
Post a chart of a leading stock in a leading industry group that has not suffered a meaningful technical breakdown. Let’s see which former leaders are still holding up, if there are any.
Finding Episodic Pivots
For those who like to track episodic pivots, simply select the EP preset filter and check it each day. There are usually only a handful of stocks to review, making it easy to identify potential opportunities without searching through thousands of names.
For example, ATAI recently appeared in the EP scan. From there, you can scroll down to the Ticker Info & News panel to review the latest headlines and quickly identify the catalyst behind the move, whether it is earnings, a major company announcement, or another significant event.
In ATAI’s case, the catalyst was the announcement that LLY would acquire the company.
Three New Research Panels Are Now Live
We added three new side panels to the Momentum Trading Strategy software this week: Historical RS, Institutional Sponsorship, and Surprises & Revisions.
Each panel is designed to provide an additional layer of research beyond the headline earnings, sales, relative strength, and fund ownership numbers you already see in the scanner.
Historical RS
The Relative Strength readings currently displayed in the software show a stock’s performance ending today.
For example, the one-month RS measures relative performance over the month ending today. The three-month RS measures the three months ending today, and the same applies to the one-week, six-month, and one-year readings.
The new Historical RS panel allows you to change the anchor date and see what those readings looked like at an earlier point in time.
For example, you can select one year ago and see what the stock’s one-month, three-month, six-month, and one-year RS readings were as of that date. You could also go back six months and see what the three-month RS looked like at that specific point.
The panel also displays the stock’s Weighted RS score, its Industry Group Blended RS score, and the company’s industry.
Institutional Sponsorship
We already displayed quarterly fund ownership, including the number of funds holding a stock and the quarter-over-quarter percentage change.
That allows you to see whether institutional ownership has been increasing or decreasing over several quarters.
The new Institutional Sponsorship panel takes the research one level deeper by showing the specific institutions involved in the stock.
O’Neil explained that it is not enough to know how many institutions own a company. Investors should also examine which institutions are involved, whether better-performing funds are participating, whether those funds have recently established positions, and whether the overall number of sponsors is increasing.
The panel gives you a clearer view of who is behind the ownership numbers and provides a starting point for evaluating the quality of that sponsorship.
A recognizable fund name does not automatically make the sponsorship high quality, but seeing the specific institutions involved gives you considerably more information than the fund count alone.
Surprises & Revisions
Strong quarterly earnings and sales growth remain the primary fundamental numbers we care about.
However, O’Neil also discussed the value of tracking earnings surprises and changes in analyst estimates as a secondary layer of research.
The new Surprises & Revisions panel displays earnings surprises, sales surprises, estimate revisions, and recent analyst upgrade and downgrade activity.
Some of the market’s strongest growth stocks can repeatedly report results well above expectations while analysts continue raising their future estimates. We saw this in names such as MU and SNDK during their strongest periods of earnings and sales growth.
That combination can help identify a company whose business is improving faster than the market originally expected.
Analyst upgrades and downgrades are also included because an unexpected change in opinion can sometimes act as a short-term news catalyst. However, these ratings should never be treated as standalone buy or sell signals. O’Neil repeatedly warned against blindly following analyst recommendations.
These panels do not replace the primary work of studying the chart, earnings and sales growth, price action, market direction, industry-group leadership, and the primary CAN SLIM criteria.
They simply give you more ways to dig beneath the surface and better understand the companies you are researching.
AMD has been one semiconductor name that has held up well.
