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Adam Sarhan: If The Market Rallies, Sketchers May Help Lead It

Adam Sarhan: If The Market Rallies, Sketchers May Help Lead It

Adam Sarhan is a monthly guest on #PreMarket Prep, a daily trading idea radio show hosted by Joel Elconin and Dennis Dick.

Sarhan Capital CEO Adam Sarhan told Benzinga that Sketchers USA Inc (NYSE: SKX) is "one of the strongest stocks in the market right now." The stock has been a "textbook example" of what a leading stock should do, Sarhan said, pointing to the stock's strong moves higher on heavy volume.

Year-to-date, Sketchers has gained 152 percent following gains of 67 percent in 2014. During this time, the stock has seen "big breakaways higher" on very heavy volume followed by "another gap and heavy volume."

Further, Sarhan said that even with stock market weakness, Sketchers "refuses to fall." Even with major indices in "correction territory," Sketchers is still trading near its 50-day moving average, now at $139.63. Meanwhile, a stock like Apple Inc. (NASDAQ: AAPL) is trading 5 percent below its 50-day moving average.

Sarhan also pointed out why it was critical to identify strong stocks even during market weakness. "The best thing that we can do is isolate strength," he said. Those stocks that are holding up well in market weakness are typically the stocks that will "lead" when the market decides to go higher.

Sketchers has fallen nearly 15 percent from its 52-week high, at $163.60. The stock has performed in line with the S&P 500 since August started – both of which have declined 7.36 percent. During nearly every other time period, Sketchers has handily outperformed the index.


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