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Technical Analysis Explained, Fifth Edition: The Successful Investor's Guide to Spotting Investment Trends and Turning Points, 5th Edition by Martin J. Pring

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32 USING TECHNICAL ANALYSIS TO SELECT INDIVIDUAL STOCKS

A useful systematic approach for stock selection is what is known as the top-down approach. In this case, the “top” represents an analysis of whether equities in general are experiencing a primary bull or bear market. Since most equities rise during a bull trend and decline during a bear trend, the first step establishes whether the overall environment is likely to be positive or negative.

The next involves an appraisal of the various sectors and below them, industry groups, since equities in the same industry generally move together, as do industry groups in their sector. Once an attractive industry group has been isolated, the final stage involves the selection of individual stocks. This ...

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