Invezted

Stock Picking , Index>Group>Stock > strongest vs. weakest

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First Compare the Index , with its Groups , watch wich groups are acting stronger or weaker then the overal market
then go into that group and look for the weakest/strongest stock , to take a trade on

if a group acts stronger then the overall market, pick a strong stock within that group
if a group acts weaker then the overall market , pick a weak stock wihin that group

One of the best indications of the future course of a group or a stock its comparative strength
when the rest of the market is weak, or its comparative weakness in a strong market.


James R. Keene used to say:
"Watch the stock that shows strong resistance to pressure when the market is weak,
and buy those stocks for all you are worth.

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Looking at the SP500             and its recent selloff , we can see that the XLP             responds the most ie XLP             acts weaker then the overal market.

compared to the XLU             which doesent quite responds that well to the sellof ie. XLU             acts stronger then the overall market.

XLV             doesnt quite react well on the rallies in the overall market and is way off its highs , ie. XLV             is acting weaker aswell

lets compare XLU             vs. SP500             side by side , to show you what i mean:
snapshot

XLU             was stronger then SP500             over the course , and played a big role on the advance of the overall market

A.) the low at A has been taken out on the SP             while XLU             made a higher low (strong)
B.) as XLU             topped out the SP             stayed on its high and formed a range
C.) while SP             and XLU             found support , the SP             dropped through that support while XLU             held support (strong)

now as XLU             was taking a leading role in the strenght of the overall markets m it may verywell be the case that we are just in a resting spell , and XLU             may return to its strenght and push higher , pulling the SP             along the way

so we dig into XLU             and find stocks which act strong and are about to move , soonest fastest and furthest

first Stock XEL            
snapshot

XLU             , stays within its upchannel near the demandline while XEL             picked up momentum and bounced off the "mean"

more in comments....

snapshot


XLU is currently within a downchannel near the "Mean" . while XEL not only took out the recent swing high (A) but also sits at the 50% retracement , where a buying opportunity may arise , furthermore on a decline of XLU the next best buying op. would be at a major conflunce area (demadnline+"mean"+support)
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Invezted Invezted

snapshot


ES would be another nice opportunity in playing a strong stock , as it alos took out its recent high (A) and aswell is residing at its 50% retr. level ,
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Invezted Invezted
snapshot

ES acting pretty strong taking out the high on a nice rally (A) compared to XLU and is pretty much unresponsive towards the current decline in XLU , forming a lil range , whereas buying support or a pullback after a breakout would reveal a nice long play
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Invezted Invezted
snapshot


now lets take a look at a rather weak group XLP and compare it with PG just look at the rally from (A) while XLP prettymuch gained some ground PG prettymuch was moving sideways
breaking the support (B) while XLP stayed well above ...
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Invezted Invezted
snapshot

a closer look at PG vs. XLP reveals some more weakness , as while XLP at least traded to its recent swing high , PG made a lower high even (A) below the 50% retr.
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