We love our bottoms-up scans here at All Star Charts. We tend to get really creative when making new universes as we want to be sure they will deliver us the best opportunities the market has to offer.
However, when it comes to our latest project, it couldn't be any simpler!
With the goal of finding more bullish setups, we have decided to expand one of our favorite scans and broaden our regular coverage of the largest US stocks.
Welcome to The Junior Hall of Famers.
This scan is composed of the next 150 largest stocks by market cap, those that come after the top 150 and are thus covered by the Hall of Famers universe. Many of these names will someday graduate and join our original Hall Of Famers list. The idea here is to catch these big trends as early on as possible.
There is no need to overcomplicate things. Market cap is a quality filter at the end of the day. It only grows if price is rising. That's good enough for us.
As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach.
It's really been working for us!
One way we're doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).
Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.
But the scan doesn't just end there.
We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.
The old saying from our friend Jeff Hirsch goes, "Buy in October and Get yourself Sober".
Did you listen?
And it's not so much about literally buying blindly in October, and more about the fact that stocks tend to end their seasonal corrections around that time, before going on to rally into the end of the year.
And that's exactly what we've seen.
Here is the 4-year seasonal cycle, which of course, suggested strength in equities since mid-term elections last year. And we certainly saw it.
Then the Q3 correction came and went, again all perfectly normal.
And finally that year end strength, which of course we're seeing:
From the Desk of Steve Strazza @sstrazza and Alfonso Depablos @Alfcharts
This is one of our favorite bottom-up scans: Follow the Flow.
In this note, we simply create a universe of stocks that experienced the most unusual options activity — either bullish or bearish, but not both.
We utilize options experts, both internally and through our partnership with The TradeXchange. Then, we dig through the level 2 details and do all the work upfront for our clients.
Our goal is to isolate only those options market splashes that represent levered and high-conviction, directional bets.
During bull markets, the leading stocks tend to remain leaders longer than most investors can fathom.
That's just how markets work.
This cycle Nvidia has been a big winner. It was one of the first to break out to new all-time highs. And it's been one of the best performers, despite its massive $1.2 Trillion market cap.
That's the exact definition of a market leader. And our bet is that it continues to hold that title:
We've had some great trades come out of this small-cap-focused column since we launched it back in 2020 and started rotating it with our flagship bottom-up scan, Under the Hood.
For the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.
That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.
We expanded our universe to include some mid-caps.
To make the cut for our Minor Leaguers list now, a company must have a market cap between $1 and $4B.
As we always like to say around here, it's a market of stocks.
When we refer to "the stock market", let's remember that there are 500, or so, stocks in the S&P500. There are 3000 stocks in the Russell3000.
It's a market of stocks.
That's how we knew the market started to improve 18 months ago, because the list of stocks making new lows peaked in June 2022.
Even in the most recent correction in Q3 this year, the new lows list peaked on October 3rd.
On the other side of that formula is the list of stocks making new highs.
The list of stocks on the NYSE making new highs is the longest its been in over 30 months.
The list of stocks making new highs keeps getting longer. The list of sectors and industry groups making new highs keeps getting longer. The list of countries around the world making new highs keeps getting longer.
It's almost as if the market is getting stronger, not weaker.
And when you zoom out, you can see that this structural bull market remains intact.
