United we win, divided we fall. This fits perfectly in the stock market. We always see how a stock is performing, but we forget to check how its sector is performing. In our daily lives, we see there are some sectors that have booming business opportunities and some that are already flying high. The same happens in the stock market.
The stocks are led by the sector and the sector is led by the stocks. Stock and sectors always go hand in hand. This is the reason many swing traders find good and reliable trades with the help of advanced sector rotation analysis.
Sector analysis involves studying sectors and then forecasting the price movements of the stocks. Swing traders who want to catch short moves in the price in a few weeks and months highly benefited from the sector rotation strategy. Sector rotation involves the rotation of sectors from high to low.
Also Read: 5 important things to consider before foreclosing your home loan
Neither all sectors are up at the same time, nor all sectors down at the same time. A good trader needs to study the candlestick charts and go through the past price movements of the sector. This helps in tracking how stocks have been performing in certain circumstances.
Keeping the technical analysis aside, when we consider the economic aspects, no sector can always be flourishing or always be at the bottom.
In recent times we can consider the example of PSU banks. The sector was down for almost 3-4 years. In the meantime, many traders and investors were losing their trust in the stocks of PSU banks.
But, here one needs to remember that no sector can be down and keep hitting new bottoms for this long. Especially, when the sector is led by the government. Swing traders who kept track of the
Read more on financialexpress.com