Short lessons on momentum trading, every day.

The Warnings Are There, but So Is the Strength

Net new lows and the percentage of stocks above key moving averages are showing some of the weakest readings I’ve seen since March. Stocks falling 4% have substantially outnumbered those rising 4%. Add a 10-year Treasury yield around 5.2%, and there are plenty of reasons to approach this market cautiously.

Yet look at QQQ and the Nasdaq Composite.

Both are sitting near their highs. On QQQ, successive pullbacks have narrowed from roughly 12% to 5% to 2%, creating VCP-like tightening up the right side of the chart. Meanwhile, leaders such as AMD continue to show strength.

The internal weakness is real, but so is the resilience in the leaders.

O’Neil explained that a market can continue advancing under the leadership of fewer, stronger stocks even as breadth deteriorates. Weinstein emphasized that weakening participation can warn of trouble before it becomes obvious in the averages. Those observations help explain why a constructive index chart and a weak broader market can exist at the same time.

The mistake would be letting either observation erase the other. QQQ holding near its highs doesn’t make the breadth deterioration irrelevant. Weak breadth doesn’t establish when the strongest stocks will stop advancing.

My approach is to respect the leading stocks and the indexes that reflect their strength. We are growth stock investors and momentum traders. We do not need every part of the market to be doing well to find opportunities in our stocks. Leadership is selective, and substantial gains can be concentrated in a relatively narrow group.

If stocks are setting up, breaking out, and following through, I will let those results help determine my exposure. The 10-year, the Dow, the Russell, and broader participation all provide context, but they do not automatically overrule constructive action in the stocks I trade. Price remains my most important indicator.

Will I remain aware of the poor breadth and rising yields? Absolutely.

But those warnings alone will not keep me on the sidelines while leading stocks continue to offer valid entries and reward them with progress. Successful breakouts and an expanding list of quality setups would support becoming more aggressive. Failed breakouts and deterioration in the leaders would support becoming more defensive.

Does participation improve around the leaders, or does the broader weakness eventually reach them?

That is what I’m watching, and I’ll adjust my exposure as the evidence develops.

“Hey MTS Velocity, show me today’s market movers with the earnings, sales, and profitability to back up the move.”

Here’s the scan:

✅ Up at least 4% today

✅ 1-month RS rating of 70+

✅ Quarterly EPS growth of at least 20%

✅ Quarterly sales growth of at least 20%

✅ ROE or pre-tax margins of at least 15%

My starting universe: 3,320 NYSE and Nasdaq stocks, already filtered for minimum price, average trading volume, and market cap.

Just 10 matches.

$ARM · $ALAB · $AMD · $MRVL · $RDDT · $SMCI · $ASX · $INTR · $SMCIP · $APH

Leading the list when I ran the scan: ARM +16.35%, ALAB +11.63%, and AMD +8.87%.

AMD has been one semiconductor name that has held up well.

AMD Is Holding Up While Semis Cool Off

While semiconductors have been beaten down over the last few weeks, AMD has held up pretty well.

That is one of the first things I look for when a leading group starts to come under pressure. I want to find the names that are refusing to break down.

AMD is sitting near highs, consolidating in a fairly tight range, and continuing to build higher lows. Price has been finding support around the 10-day and 20-day moving averages, which tells me buyers are still showing up before the stock can pull back too deeply.

When a group gets hit and most names start falling apart, the stocks that hold up near highs are worth paying attention to. They are showing relative strength both within their industry group and against the Nasdaq and S&P.

AMD is still showing strong numbers. Earnings growth is strong, sales growth is strong, and the forward estimates look impressive. That combination of technical strength and fundamental strength is exactly what I want to see.

If the group recovers and the Nasdaq and S&P break out of this consolidating range, AMD could be primed for a nice move higher.

Stocks gapping up to, or near, new highs this morning:

MU, WDC, STX, INTC, TTMI, TER, ALAB, AMD, VSH, LSCC, STM, TSM, and ADI.

The Multi-Bagger Irony

A lot of stock newsletters sell people on the hope of finding the next multi-bagger.

A 100%, 200%, or 300% winner.

Many talk about holding for years to get the big returns.

What people don't realize is this:

By the time you figure out they were full of it, they already made plenty of money selling you the hope.

The funny thing is, I don't even teach or claim to give people multi-baggers.

But many investors would likely get similar or better results by learning how to identify true growth stock leadership, proper setups, institutional demand, and strong price action.

Here are a few names I mentioned in January and early February:

• AAOI +302%

• AXTI +294%

• SNDK +249%

• DELL +214%

• MU +160%

• LITE +155%

• CIEN +147%

• STRL +127%

• STX +126%

• WDC +124%

• INTC +101%

• AMD +101%

These were discussed in the paid subscriber chat and watchlist posts.

But to be clear, this is not what I do here.

I'm not telling you to blindly buy a stock and hold it until it becomes a multi-bagger.

The goal is to teach you how to find leadership, manage risk, identify proper entries, and build a repeatable process.

The Quiet Warning Showing Up Under the Surface

A lot of leading stocks are still acting strong.

Many are making new highs. Many still have great relative strength.

Price is still king, and I would never execute a trade based on one data point alone.

But I am noticing something worth paying attention to.

On the most recent earnings reports for a lot of leading names I’ve been following, fund ownership has dropped.

Again, this does not mean the move is over.

These stocks can absolutely keep running higher from here. That’s exactly why price always comes first.

Also, sometimes this happens for a quarter or two, then funds increase again and come right back into the name.

But when leading stocks are pushing higher while fund ownership starts declining, it can be an early sign that some institutions are taking profits into strength.

If price starts to break down later, this gives us a possible clue as to what may have been happening under the surface.

Some names where I’m noticing this:

SIMO, ALAB, MRVL, LITE, TTMI, NVT, LASR, AMD, STRL, LRCX, AAOI.

This is not a sell signal.

This is not a prediction.

Just something I’m taking note of.