{"id":7738,"date":"2020-10-15T14:56:11","date_gmt":"2020-10-15T18:56:11","guid":{"rendered":"https:\/\/morpheustrading.com\/blog\/?p=7738"},"modified":"2022-04-06T15:04:55","modified_gmt":"2022-04-06T19:04:55","slug":"relative-strength-trading-2","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/relative-strength-trading-2\/","title":{"rendered":"How To Easily Find the Next Leading Stocks After a Market Correction"},"content":{"rendered":"\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"1000\" height=\"792\" src=\"https:\/\/new.morpheustrading.com\/blog\/wp-content\/uploads\/2020\/10\/FAVPNG_idea-incandescent-light-bulb-cartoon-lamp_nL1kvNJt.png\" alt=\"trading tips\" class=\"wp-image-7788\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/10\/FAVPNG_idea-incandescent-light-bulb-cartoon-lamp_nL1kvNJt-110x87.png 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/10\/FAVPNG_idea-incandescent-light-bulb-cartoon-lamp_nL1kvNJt-300x238.png 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/10\/FAVPNG_idea-incandescent-light-bulb-cartoon-lamp_nL1kvNJt-768x608.png 768w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\" \/><\/figure><\/div>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength-trading-2\/#When_stocks_are_finding_a_bottom_after_a_correction_buying_the_right_stocks_is_crucial_Heres_a_simple_technique_known_as_Relative_Strength_that_enabled_us_to_identify_and_buy_NET_before_it_rallied_to_a_46_gain_in_our_portfolio_in_less_than_two_weeks\" >When stocks are finding a bottom after a correction, buying the right stocks is crucial. Here&#8217;s a simple technique known as Relative Strength that enabled us to identify and buy $NET before it rallied to a +46% gain in our portfolio (in less than two weeks).<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength-trading-2\/#Cloudflare_NET\" >Cloudflare ($NET)<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength-trading-2\/#46_gain_in_less_than_two_weeks\" >+46% gain in less than two weeks<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength-trading-2\/#Cloudflare_%E2%80%93_The_buy_entry_and_blast-off\" >Cloudflare &#8211; The buy entry and blast-off!<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength-trading-2\/#Relative_strength_on_multiple_timeframes\" >Relative strength on multiple timeframes<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"When_stocks_are_finding_a_bottom_after_a_correction_buying_the_right_stocks_is_crucial_Heres_a_simple_technique_known_as_Relative_Strength_that_enabled_us_to_identify_and_buy_NET_before_it_rallied_to_a_46_gain_in_our_portfolio_in_less_than_two_weeks\"><\/span>When stocks are finding a bottom after a correction, buying the <em>right<\/em> stocks is crucial. Here&#8217;s a simple technique known as Relative Strength that enabled us to identify and buy $NET <em>before<\/em> it rallied to a +46% gain in our portfolio (in less than two weeks).<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>During the recent, intermediate-term correction in the stock market, the Nasdaq Composite and S&amp;P 500 both pulled back approx. 11-12% off their highs.  <\/p>\n\n\n\n<p>Since top growth stocks outperform on the way up, they also typically retrace two to three times more than the major indices during a market correction (20-30%).<\/p>\n\n\n\n<p>When corrections begin, we prefer to take profits in extended stocks and wait for new bases to form.   <\/p>\n\n\n\n<p>This is preferable to sitting through a potentially sharp pullback that could cause our positions to give back 50-75% of our gains.<\/p>\n\n\n\n<p>That&#8217;s why we quickly took profits and minimized losses in our<em><a rel=\"noreferrer noopener\" aria-label=\"The Wagner Daily (opens in a new tab)\" href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\">Wagner Daily<\/a><\/em> model portfolio when the September correction began.<\/p>\n\n\n\n<p>But the real question is how do we know <em>when<\/em> to get back into the market&#8230;and exactly <em>what<\/em> to buy? <\/p>\n\n\n\n<p>Continue reading to find out how a simple technique known as <em>relative strength<\/em> helps you easily identify new, emerging leadership when the major indices are forming a bottom after a correction.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cloudflare_NET\"><\/span>Cloudflare ($NET)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"46_gain_in_less_than_two_weeks\"><\/span>+46% gain in less than two weeks<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>When stocks recently began finding an intermediate-term bottom, the clear relative strength of Cloudflare ($NET) grabbed our attention as a potential buy setup in our <a rel=\"noreferrer noopener\" aria-label=\"swing trading report (opens in a new tab)\" href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\">swing trading report<\/a>.<\/p>\n\n\n\n<p> While the S&amp;P 500 and NASDAQ were still well below their 50-day moving averages and trending lower, $NET reclaimed key support of its 50-day MA on September 21.<\/p>\n\n\n\n<p>Cloudflare had also formed a &#8220;higher low&#8221; well ahead of the main stock market indexes. <\/p>\n\n\n\n<p>The chart below shows the relative strength that $NET began showing <em>before<\/em> it blasted nearly 50% higher:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"893\" height=\"829\" src=\"https:\/\/new.morpheustrading.com\/blog\/wp-content\/uploads\/2020\/10\/201014NETBLOG1.png\" alt=\"\" class=\"wp-image-7760\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/10\/201014NETBLOG1-110x102.png 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/10\/201014NETBLOG1-300x278.png 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/10\/201014NETBLOG1-768x713.png 768w\" sizes=\"auto, (max-width: 893px) 100vw, 893px\" \/><\/figure>\n\n\n\n<p>When a stock is already trending higher as the major indices are sideways to lower, <em>this<\/em> is what we mean by <em>relative strength<\/em> (not to be confused with the <a href=\"https:\/\/www.investopedia.com\/terms\/r\/rsi.asp\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"RSI indicator (opens in a new tab)\">RSI indicator<\/a>).<\/p>\n\n\n\n<p>If a stock has so much relative strength that it trends higher even while the broad market is not, guess what happens when the major indices eventually rally as well?<\/p>\n\n\n\n<p>The stock with relative strength rockets higher! <\/p>\n\n\n\n<p>It also potentially becomes a new leading growth stock for the market&#8217;s next bull run.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cloudflare_%E2%80%93_The_buy_entry_and_blast-off\"><\/span>Cloudflare &#8211; The buy entry and blast-off!<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>After $NET reclaimed its 50-day MA, we notified subscribers of a new buy setup in our <em><a rel=\"noreferrer noopener\" aria-label=\"Wagner Daily (opens in a new tab)\" href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\">Wagner Daily<\/a><\/em> watchlist.<\/p>\n\n\n\n<p>$NET subsequently triggered for buy entry in our report when it moved above the September 28 high (which also correlated to a breakout above resistance at $41).<\/p>\n\n\n\n<p>As shown below, $NET initially wedged higher after our entry, but then exploded after setting a new high:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"893\" height=\"829\" src=\"https:\/\/new.morpheustrading.com\/blog\/wp-content\/uploads\/2020\/10\/201014NETBLOG2.png\" alt=\"\" class=\"wp-image-7762\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/10\/201014NETBLOG2-110x102.png 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/10\/201014NETBLOG2-300x278.png 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/10\/201014NETBLOG2-768x713.png 768w\" sizes=\"auto, (max-width: 893px) 100vw, 893px\" \/><\/figure>\n\n\n\n<p>Currently, our $NET position is showing an unrealized gain of +46% in our model portfolio since our buy entry on September 28 (less than two weeks ago). <\/p>\n\n\n\n<p>Now, we will continue to trail our sell stop higher to lock in gains when the inevitable correction sets in. <\/p>\n\n\n\n<p>As always, <a rel=\"noreferrer noopener\" aria-label=\"newsletter (opens in a new tab)\" href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\">newsletter<\/a> subscribers will be immediately alerted of any action on the position.<\/p>\n\n\n\n<p>In addition to $NET, we also used relative strength to find ideal buy entry points in $TWLO, $DDOG, and $PINS recently&#8211;all of which are showing significant unrealized gains since our entries.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Relative_strength_on_multiple_timeframes\"><\/span>Relative strength on multiple timeframes<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Relative strength enables us to quickly identify potential leading growth stocks, and to enter at low-risk buy points&#8211;well ahead of the crowd that only buys obvious breakouts to new highs.<\/p>\n\n\n\n<p>The best thing about relative strength trading is that it also works well on all trading timeframes.<\/p>\n\n\n\n<p>Whether you are a swing trader holding stocks for a few days to weeks, or a daytrader who holds for a few minutes to hours, the concept of relative strength trading works the same.<\/p>\n\n\n\n<p>Regardless of your trading timeframe, simply look for the stocks that are setting new highs and forming new uptrends ahead of the major indices. <\/p>\n\n\n\n<p>If your stock follows through, it will likely outperform the gains in the broad market when it bounces. <\/p>\n\n\n\n<p>But even if the major indices fail to find a bottom and keep heading lower, stocks with relative strength are also the last to fall&#8211;thereby lowering your risk as well.<\/p>\n\n\n\n<p>Relative strength is a trading technique that works fantastically well to identify leadership in the market <em>and<\/em> to minimize your risk.  <\/p>\n","protected":false},"excerpt":{"rendered":"<p>When stocks are finding a bottom after a correction, buying the right stocks is crucial. Here&#8217;s a simple technique known as Relative Strength that enabled us to identify and buy $NET before it rallied to a +46% gain in our portfolio (in less than two weeks). During the recent, intermediate-term correction in the stock market, [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[],"class_list":["post-7738","post","type-post","status-publish","format-standard","hentry","category-stock-trading-strategy"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/7738","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=7738"}],"version-history":[{"count":14,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/7738\/revisions"}],"predecessor-version":[{"id":7790,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/7738\/revisions\/7790"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=7738"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=7738"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=7738"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}