Why does the Industry Group matter?

Industry Groups are a collection of stocks that offer similar products or provide similar services. For example if 3 companies drill oil than they are all in the oil industry group.

Each group will have a seperate chart for that group. The chart is the average of all companies in that group. This is the best way to see where the institutional money is flowing into the Market. The chart will give an indication as to where the industry is headed. Why is it important to look at industry charts?

An industry group may account for half of the movement of a stock. Most stocks rise and fall as it relates to the strength or weakness of its Industry Group. Think about it. If energy companies'receive bad news, people may start to sell their holdings in energy stocks.

If the Group has a down day most of the stocks within that group will have a down day as well.

So what should we look for when searching industry groups? It depends on if you are bearish or bullish. For Bullish trades buy stocks that are in Groups that have had a history of going up. If you want to be bullish on the housing market but it is going down don't do it.For Bearish trades reverse the scenario, look for down trending stocks.

Happy Trading!

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