Is it More Important to See Other Stocks in the Industry Group with High Relative Price Strength than a High Industry Group Relative Strength Rating for the Entire Group. Why?

 

The majority of leading stocks are in leading industries. Studies show 37% of a stock’s price movement is directly tied to the performance of its industry group. Another 12% is due to the strength in its overall sector. Therefore, roughly half of a stock’s move is due to the strength of its respective industry. But note that just because the relative strength of the group is on the low side, does not necessarily mean the group is bad. Sometimes, there are only a few true leaders in a group. If the group happens to be large or it is just beginning a move, the group relative strength rating may be skewed to the low side. This is why it’s important to see other stocks in the same group with high Relative Price Strength Ratings rather than a high rating for the entire group itself.

Leave a Reply

Your email address will not be published. Required fields are marked *