In This Chapter
Understanding chart advantages
Selecting sectors with strength
Projecting price movement
In a market that is functioning optimally, there are broad advances that include most market sectors. That means that when the broad averages move strongly up, so do most stocks and sectors. Thus, it follows that in a true down trend, the opposite is true, meaning that most stocks and sectors follow the down trend evident in the broad averages and market indexes.
But that is not always the case. In some situations, sectors don’t move in exact tandem with indexes. This is because in some instances economic conditions favor one group or another for a period of time, and then as conditions change, so do the sectors displaying strength or weakness.
Focusing on strong or weak sectors allows you to apply strategies that are best suited for current market conditions. First, of course, you have to know how to find them. Technical analysis provides you with tools for analyzing sectors, including those geared toward identifying relative strength and weakness. In this chapter, we give you the technical analysis basics you need ...