- 1). Get a copy of the Sunday edition of Investor's Business Daily. The Sunday Edition will post a list of the strongest sectors within the stock market and their accompanying Relative Strength (RS) ratings. Relative Strength is a scoring of 0 through 100 on a stock sector's strength in comparison with the overall market. The higher the score the stronger the stock sector. You will take note of the 6 month and 12 month RS ratings for the top 10 stock sectors.
- 2). Compare the 6 month RS readings to the 12 month RS readings of the list of stock sectors. Identify which stock sectors have higher 6 month RS ratings in relation to the other sectors on the list and highlight them.
- 3). Use the highlighted list to now compare their 6 month RS scores in relation to their 12 month RS scores. Identify the stock sectors whose 6 month RS scores are higher in comparison with their 12 month RS scores and who happen to be in the lower half of the stock sector list in Investor Business Daily's Sunday edition. These sectors are revealing short-term strength in their 6 month RS which is rising and can be determined to rotate into the upper half of the strongest stock sectors. Once that happens then they can become leading sectors in the stock market in performance.
- 4). Spot the stock sector's price action to coincide with their rising RS to forecast as it emerges as a stock market leader when it trades at a 52 week high. Once it does this then its RS and price action confirm that it has emerged as a leader in the stock market and will likely take it higher. You can forecast the higher performing sector will take the market higher and whose price strength will likely give a higher return with a lower adjust return.
Investor's Business Daily
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