“Relative Strength Doesn’t Work.” Okay.
“It only finds extended names.”
“I don’t want to buy strong stocks because they’ve already moved too much.”
I hear this all the time.
Most of that fear does not come from relative strength being flawed.
It comes from people not knowing how to manage risk, or frankly, not studying big winning stocks cycle after cycle.
If you understand position sizing, proper entries, logical stops, and low-risk, high-reward setups, high relative strength is not something to fear.
It is something that should grab your attention.
AXTI is a great example.
Back in February, it had a 99 RS and was sitting near the top of my Relative Strength Stock Screener.
It kept showing up week after week.
Month after month.
And since then, it has gone up more than 325%.
That is what strong stocks often do.
They go much higher than most people expect.
And weak stocks often go much lower than most people expect.
AXTI also had something else going for it:
A strong stock, in a strong group, aligned with a major bull market theme.
That is a principle that has shown up in market leaders for decades.
Follow relative strength.
Do not fear strength just because other people do not know how to manage risk.
If the trade does not work, you get out with a small loss.
If it works, you have the potential for a huge gain.
