Amazon (AMZN) was one of those stocks that were big leaders after the market bottom in 2003. In fact, Amazon bottomed almost 10 months before the general market and during the last few weeks of final sell-off in general indices, AMZN formed a very constructive pennant pattern, which was perfectly buyable. As the market tested the lows again in March 2003, AMZN was holding up well, building another base that showed its superior strength during that time.
E-Bay (EBAY) is another good example of a high relative strength stock, which turned out to be a bull market leader. It bottomed seven months before a general market and completed a constructive double bottom base and exploded higher together with the market. EBAY's leadership quality became even more apparent in weeks ahead as it formed two tight channel bases that are almost always a sign of extreme strength.
Yahoo (YHOO) was a bit different story. It bottomed together with the market in a selling climax, but the doubled in less than two months, kept the high relative strength during correction and broke out to new highs again when the pressure from the market was released.
Taser (TASR) is an example of a pennystock that literally exploded when the market started rising. From the breakout point to the climax top TASR made almost 10000% to those who were patient and brave enough to hold such a volatile stock.
There are plenty of examples of how stocks build buyable bases during last stages of a bear market also from the 2007-09 bear. Leaders of past bull cycles usually don't lead the next, but Amazon was an exception. Again, it bottomed way ahead of the market and built a constructive tight channel during the last selling climax.
Baidu (BIDU) is an example of a stock that doesn't fall with the last stages of a bear, nor does it make any significant progress, but simply builds a base while everything is going down. BIDU was a difficult buy as it did not breakout on any significant volume and price increase, but nevertheless it was one of top stocks of the 2009-2010.
Chipotle Mexican Grill (CMG), a fast-food franchise, surprised just about everyone during the past bull cycle. However, if we look at CMG during 2009 bottom, it is clear that something was brewing under the surface of a just-another-fast-food-franchise at that time. CMG's base is not the best looking in the world but the fact that it was 25% above lows while everything else was making new lows, is a sign of superb relative strength, which took stock up to the 350's area in the following two years.
The last stock we are going to look at is Netflix (NFLX), a superstar of the past bull. NFLX was one of those stocks that are almost impossible to grab a share of as they start their magnificent run way before the market turn. As the bear market bottomed NFLX was already 100% profitable to those that bought at exact lows. Of course, no sane person would buy such an extended stock, but NFLX finally tagged the $300 mark.
The point of this post was simply to show on some charts how bear market bottoms are actually made. It is not a one-day event when big institutional investors simply decide that they will buy every stock available, but a process, brewing under the surface several months before a final bottom. The most promising stocks will bottom ahead of the market and build constructive bases during the last shakeout. And when the number of such high-quality bases starts to increase week after week, this is by far the most reliable sign that bear market bottom may be just around the corner. Don't miss it.
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