How SMA Count and Relative Strength Reveal Market Leaders

Want to pinpoint potential market leaders and understand underlying trends before major moves happen?

Our data-driven approach focuses on Simple Moving Averages (SMAs). We track how many stocks fall below key SMAs to gauge overall market health – a crucial first step.

More importantly, we show you how to identify stocks already demonstrating strong Relative Strength (RS) and those just breaking out, signaling fresh momentum.

Continue reading to spot the leaders and enhance your trading decisions.

Market Health Indicators & Stock Movement Underlying Markets Health SMA Count vs NIFTY (Inverse Relationship) More stocks below SMAs: Nifty tanks Less stocks below SMAs: Nifty rises Helps identify real market trends Filters out market noise NIFTY SMA Count Strong RS Stocks Trading above key SMAs Upward sloping MAs Strong relative strength (RS) Often lead bullish trends Price SMA Spotting Emerging Leaders Potential Breakouts Just moved above key SMAs Signals fresh momentum Attracts institutional interest High-probability trade setups Price Resistance/SMA

Underlying Markets Health

Tracking the SMA count ( total stocks trading below the 50, 150, and 200 DMAs ) helps filter market noise and identify real trends. The Nifty typically moves inversely to the SMA count:

  1. When more stocks fall below key SMAs, Nifty declines or stagnates.
  2. When fewer stocks are below SMAs, Nifty tends to rise.

You should track this metric to cut through daily market noise for a clearer view of underlying market trends and potential turning points.

While observing SMA count vs nifty chart, watch for the rising SMA count line to plateau - potential signal of Nifty bottom and trend reversal upwards. Conversely, flattening of a declining SMA count line signals Nifty top and beginning of a downward trend.

Stocks Showing Strong RS

Keep a watch on stocks trading above key 50, 150, and 200 day moving averages with upward slope. They demonstrate strong relative strength (RS) compared to the broader market. These stocks often lead the market during bullish trends. Consider entering them when overall market health improves, which can be signaled by:

  1. Significant fall in SMA count from its high.
  2. Nifty trading above key moving averages.
Exercise patience and refrain from buying these strong relative strength stocks unless a substantial drop in the SMA count coincides with the Nifty trading above its key moving averages. These two conditions must be in place to suggest the genuine commencement of a new uptrend.

Spotting Emerging Leaders

If the prior list of strong RS stocks felt overwhelming, consider focusing your attention on the new entrants to the list. These fresh entrants might offer more immediate trading opportunities.

Here are the stocks that have just moved above key SMAs, signaling fresh momentum and potential breakouts. Traders can use this to spot emerging leaders early, increasing the chances of catching trend continuations.

Such stocks often draw institutional interest, making them ideal for momentum and trend-following strategies.

Focusing on these fresh entrants with strong price action helps prioritize high-probability trades backed by rising demand and bullish momentum.


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