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Analyzing Stock and Sector Price Momentum

by Joe Lan, CFA

Analyzing Stock And Sector Price Momentum Splash image

In Michael Kahn’s article in this issue, “Picking the Right Stocks Using Charts,” he recommends adopting a top-down approach to investing by adding relative strength to your investment analysis. Specifically, Kahn advocates the use of charts to visually see relative strength changes rather than simply using numerical relative strength calculations.

Charts and industry strength data can be found online. The following sites are great places to start.

Charting Software & Websites

BigCharts.com
bigcharts.marketwatch.com

BigCharts.com provides free charting, numerous technical indicators, market and company news, historical quotes and industry analysis. The website allows you to use predefined time periods or specify your own and includes 30 technical indicators.

FreeStockCharts.com
www.freestockcharts.com

FreeStockCharts.com, developed by Worden Brothers, offers free “real-time” data by using the BATS exchange for data less than 15 minutes old. In addition to the usual chart plots and indicators, users can create and save their own watchlists.

Investor/RT 10.0
www.linnsoft.com

Investor/RT 10.0 is one of the few investing software programs compatible with both Windows and Mac. A choice of real-time data, intraday data or end-of-day data is offered, along with standard and professional versions of each. The standard versions offer predefined technical indicators and charting tools, while the professional version allows users to perform custom scans and create custom indicators. Cost ranges from $20 to $75 per month.

MetaStock 11 End-of-Day
www.equis.com

The MetaStock software program offers nine different charting styles and over 350 technical indicators. Furthermore, the software provides over 90 “broad market indicators,” including monetary indicators and momentum indicators for the NYSE and NASDAQ. You are also able to create your own indicators. Cost is $59 per month.

StockCharts.com
stockcharts.com

StockCharts.com offers a wide collection of free charting capabilities along with over 40 technical indicators. There are several pay levels of service that provide additional technical indicators and real-time data. Furthermore, a comprehensive education section is available in the ChartSchool section, covering the basics of investing and technical analysis and how to use technical indicators.

Data on Sector Exchange-Traded Funds (ETFs)

Select Sector SPDRs
www.sectorspdr.com

Select Sector SPDRs offers performance information on sector ETFs, including consumer discretionary, consumer staples, energy, financial, health care, industrial, materials, technology and utilities. These ETFs are market-weighted, which means that the companies with the largest market capitalizations will have the highest weights in the ETF; therefore, the largest companies will have the greatest influence on whether the sector and the ETF rises or falls.

Rydex SGI
www.rydex-sgi.com

Rydex SGI provides sector ETFs for consumer discretionary, consumer staples, energy, financials, health care, industrials, materials, technology and utilities. However, these ETFs are equal-weighted—that is, the largest and smallest companies are given an approximately equal weighting in the ETF. The influence of a single large company is less than it would be in a market-weighted ETF, providing a better picture of overall sector performance. On the other hand, the performance of these ETFs may differ from the performance of a similar market cap–weighted sector index or fund.

Ranking Stocks on Relative Strength

Stock Investor Pro
www.aaii.com/store/sipro

AAII’s Stock Investor Pro fundamental stock screening and research database can be used to rank companies according to relative strength across a number of time periods. The program can also screen companies according to sector or industry, which can provide a clue as to whether the industries and sectors are leading or lagging.

—Z. Joe Lan, Assistant Financial Analyst, AAII

Joe Lan, CFA is a former financial analyst for AAII.


Discussion

Garry from VA posted over 3 years ago:

Hi Joe,

I bought a copy of Stock Investor Pro several years ago and have never used it. Does this software change over time or should mine be as useful today and it was suppose to be at the time I bought it?


Joe from IL posted over 3 years ago:

Hi E,

Stock Investor Pro is updated weekly. You can download the latest update from the Stock Investor Pro area of our website. The link is at the very top. After downloading and installing the latest update, your Stock Investor Pro will be current.


Sam from MO posted over 2 years ago:

Hi, has anyone had any experience with the "The ARORA REPORT" editor Nigam Arora of four newsletters that track the ZYX change method?


Keith from NJ posted over 2 years ago:

Does SIP cover ETFs?


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