When I say buy the industry leaders I don't mean buy the stock with the highest market capitalization. No No, BUY stocks that show relative strength in a strong industry (do the opposite if you're short selling).
For example, if the uranium sector is hot take five stocks from that sector and compare them with each other. The one with the best return has relative strength, and will most likely rebound faster than its peers (assuming you're buying at a dip). In addition, you can compare the chosen stock with a broad index like the S&P 500 to double check.
For me, I like to look at a 6 month to 1 year chart. If the stock is consistently outperforming an index then I know I’ve made the right choice, because stocks don’t just move upward for any reason. There must be a fundamental reason!
WARNING:
1. Stocks that have relative strength may not outperform the index in an intraday basis, medium to long term would be best.
2. Relative strength is NOT the RSI index. The RSI index is an overbought/oversold indicator.
3. Past performance is not an indicator of future performance. If a stock is super overbought then it is not a good entry point.
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