What are the things we look for most when trying to identify leadership?
First, it’s all relative. When the market is selling indiscriminately, this becomes more challenging. You’re literally looking for the assets that get hit the least. It’s not until the volatility subsides that we start looking for those that rebound out of it the strongest.
In today’s post, we’ll use the recent selloff and rebound in crypto as a case study for how we pick winners out of a loser’s market.
Here are two of our favorite ways to find future outperformers:
- Relative resilience during selling pressure.
- Relative momentum and strength – both into the peak and off the lows.
With the former, we can use tools like relative strength – or, rather, the absence of weakness – in addition to chart characteristics like bullish divergences and momentum not hitting oversold.
With the latter, we’re again looking at relative strength. Who were the biggest gainers since the market bottomed? Who are the first to take out their AVWAP from the highs and/or other key levels?
Which tokens are already back at new all-time highs? If it sounds simple, it’s because it is.