September 18th 2007
Making money with Sectors.
Devotees of trading can tell you, most stocks follow the trend of the overall market, and most stocks follow the trend of their industry group or sector. But how do you find a sector? How do you find the stocks that make up that sector?
An easy and free way to track this information down is by going to the website of the philadelphia stock exchange. In case you didn’t know. The Philadelphia stock exchange makes a market in a large portfolio of popularly quoted sector options. Click here to see the list. Clicking on any of these symbols will give you the sector’s components.
In esignal, I have compiled a list of these indicies. My nightly routine include looking at the chart of these symbols for patterns that I think are tradeable. When I find the tradeable pattern, I pull up the list of stocks that make up this sector. Again, I put these symbols in esginal and scan their chart for good trades. Now when I see a sector I like, I can easily look at the stocks that make up this sector. I usually find a ton of good trades with this method.
How about a specific example. Here’s a chart of the SIG Steel Producers Index.
It’s formed a nice cup and handle and has broken through its 50 day SMA. The next step is to look at STQ’s components.
Looking through the list in my perferred charting software(esignal), I like AKS over 41.75. I like CRS over 131.50, but I’d like to see it consolidate some before closing the gap. I also like RS over 55.50.
Once I have the sectors and the link to their components, the whole process takes me 15 minutes to go through and I have at least 10 trades for more detailed review.
BTW, my trade in FCX is going really well. The stock is on a tear and I’ll be taking partials very soon.
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4 Comments »
Corey on 18 Sep 2007 at 9:01 pm #
You’re right on regarding sector strength leading to greater odds of individual stock selection profitability. First of all, the sector analysis serves as a key filter that reduces the number of stocks you need to analyze. Second, it can put in in the place of highest relative strength against the broad market. Third, as you said, it cuts down analysis time.
I use the scans at Prophet.net (Industry Group Strength) to find stocks both in leading industries/sectors and lagging, which can allow for a ‘hedge’ play. There are other sites, but I’ve just gotten used to Prophet.
Jonathan on 18 Sep 2007 at 9:08 pm #
Thanks Corey. I tried Prophet for a few months a couple of years ago. I had totally forgotten about them. I’ll have to check them out again.
StockHunter on 18 Sep 2007 at 9:25 pm #
The BEST sectors site I came across is Barchart.
If you’d like to find to what sector a certain stock belongs, all you have to do is use the following link, input the symbol at the right side of the page (sector finder) and - voila!!!
http://www2.barchart.com/sectors.asp?base=industry
p.s - check out their “100 leading” and “bottom 100″ stocks lists. a lot of hidden gems there.
Jonathan on 19 Sep 2007 at 4:24 pm #
StockHunter,
That’s a great link. Thanks for the contribution.