Trade Lesson: Profit By Following The Big Money
Every bull and bear market has leadership by individual stocks and sectors. Therefore, it is important for independent traders and investors to always watch the leading stocks and sectors for clues. Certain chart patterns will indicate when the major institutional money is going to start taking profits, or even begin to accumulate a particular stock or industry group. This is why it is critical to learn and understand how to read the charts.
At this moment, some of the leading stocks in the NASDAQ Composite are Google Inc (NASDAQ: GOOG), Facebook Inc (NASDAQ: FB), Apple Inc. (NASDAQ: AAPL), Amazon.com Inc. (NASDAQ: AMZN), and Twitter, Inc. (NASDAQ: TWTR). By following these market leading stocks we can get a sense of how the overall market will perform. As long as money flow continues to lift these equities, the rest of the NASDAQ Composite Index should hold up well. Other leading equities can generally be bought on pullbacks into technical support levels, as long as these leading stocks remain in solid up-trends. Should a trader or investor see a technical reversal signal in one of these leading equities, then it could be a warning sign that the institutional money is beginning to come out of the leading stocks. When this occurs, it will often have and adverse effect on the major stock indexes.
Remember, it is the institutional money that moves markets, it is not the individual at home with an online account buying 100 shares of a stock. The institutional money is very leveraged and has unlimited buying power, therefore, the institutions are who you must learn to follow.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.