Two useful steps for finding stock market picksHow to use technical analysis of the stock market – practicallyOne recommended way to invest money is to find stock market picks that are showing relative strength. Why?Stock with relative strength shows signs of strong accumulation by institutional investors. These investors need to place huge amounts of money so their buying can move the stock price. My stock trading strategies are also based on this principle. These stocks are ideal candidates for a swing trading stock pick. But investors can use them also as an investment stock pick. The first step is to identify which part of the market is stronger. I divide U.S. stock markets into two categories.
During this first step we must evaluate which part of the market is stronger than another. This can be done simply by comparing charts of these main stock market indexes. The best way is to have both charts on the screen together and compare them visually. Here’s an example of how these charts can be compared.
As you can see in October the NASDAQ stock market was able to move much higher after a slighter pullback. The S&P500 was much weaker, and its pullback was much deeper. So the conclusion is that it was better to look for stock market picks for a long trade in technology-related stocks. The second step is needed to find a strong sector in a specified part of the market It’s necessary to look at sector charts. I do it via ETF stocks. And here’s an example of comparing of two sectors in the technology area.
In the middle of August 2008 it was easy to spot that the biotechnology sector (represented by an ETF with the symbol IBB) is the strongest sector from NASDAQ-related stocks. And that the Internet sector is very weak. The logical conclusion is that good stock market picks for a long trade during that time period were in biotechnology stocks. Return from stock market picks to stock chart analysis |
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