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Leaders are stocks that breakout immediately when the market confirms a new rally. This doesn't mean that they can't have a nice run, it just means that the chances for failure are higher because 'dumb money' may be bidding up the cheaper stock in that particular group.

The 'smart money', otherwise know as institutions may have ran up stock 'XYZ' for 3 months and will most likely allow weak holders to sell before they resume the advance.

Leaders are stocks that delivery immediately when the market confirms a new rally. In the first several weeks, strong stocks with leadership expertness will liberation on volume chosen their 50-day average. Some of these stocks will vent on the largest volume ever. Typically, newer stocks that have come public in the past few years will have the most strength for sizable gains.

As multiple stocks evasion from similar industry groups within larger sectors, a confirmation of plain-spoken leadership is established. “Sister Stocks” will usually move in crowds and lead the way in similar fashion. Their charts will show some resemblance and their fight with be only just related. When one leader goes up, so will the others in the group. It’s not an exact science but about anyone could portrayal the progression of leaders during the primeval stages of a rally.

Laggards are stocks that don’t issue immediately when the market confirms a new rally. They reduce to laggards if they wait a few months to finally scape while dozens of other stocks have then as previously gone on to excellent runs. Investors must be on the lookout for a healthy correction hinder several strong months of natural development within a specific industry group or damsel sector. As the correction materializes, the original leaders will be poised to continue their run so long as the ‘M’ in CANSLIM is still positive. ‘M’ stands for market health.

Investors must be on the lookout for stocks that only start their betterment on the overall correction. These stocks tend to be weaker and are more prone to failure. The original leaders will have more institutional support and are more likely to open up further. Laggards will often sport a nice extrication during the correction phase, only to disappoint the investor with a reversal.

Let’s use a hypothetical example: XYZ breakouts out in October and runs up 50% in 3 months and then pulls back to correct. ABC breakouts out 3 months later in January while the correction is taking place (from the same industry group) but has been stagnant the past 3 months as many other stocks in the industry groups have made nice gains (like XYZ).

Laggards stay stagnant during the stock stages of bull markets. This doesn’t mean that they can’t have a nice run, it just means that the luck for failure are higher cause “dumb money” may be bid up the cheaper stock in that particular group.

The “smart money”, otherwise know as institutions may have ran up stock ‘XYZ’ for 3 months and will most likely assent weak holders to sell up to they resume the advance. In the mean time, those weak holders may be the investors running up stock ‘ABC’ since it looks cheap. They may reason that it should be moving up considering ‘XYZ’ moved up in the prior 3 months.

Finally, be punctilious and analyze each specific stock and situation yet you make a commitment. This is a general rule to help you select a leader within a strong industry group. The market never works perfectly every time so make sure you are prepared for anything.

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