Rule 22 – A wise man can hear profit in the wind
Rule 44 – Never confuse wisdom with luck
Rule 69 – Ferengi are not responsible for the stupidity of other races
Rule 74 – Knowledge equals profit
Rule 162 – Even in the worst of times someone turns a profit
Rule 217 – You can’t free a fish from water
Below you will find relative strength charts of four different industry groups versus the S&P 500. If the chart is uptrending then the industry group is outperforming the S&P 500 whereas the opposite is true if we were searching for bearish stocks. The recent decline in the markets makes the wise trader prove his mettle. As I mentioned before the prudent investor is looking for the next opportunity. Since stocks tend to move with their industry groups we can find good stocks by finding industry groups with strength.
Relative Strength Charts
Major Drugs
I particularly like this chart because it has recently broken out of a down trend. Although we didn’t get the very bottom (and rarely will we ever) we may be getting in on a fresh new uptrend.
Insurance Accident & Health
Insurance Accident & Health
Insurance gives me similar excitement because we see it was in a sideways basing pattern for some time. Now we see it has broken out of its consolidation and a new uptrend may be on the way.
Tobacco
Tobacco
Tobacco has been showing strength for some time so we aren’t necessarily finding a bottom but we are seeing a break out of a “resting period”. These companies do a lot of exporting so they are benefiting from a weak American dollar. Also, any Ferengi investor understands what a good investment addictive products are!
Oil & Gas Operations
We have all seen gas and oil companies profiting from the rise in oil prices. Once again the weak dollar along with higher world demand for crude has driven oil prices higher and higher. A break out of this consolidation is also evident on the chart.
Here we have identified four possible groups of opportunity. Look for my next postings where I will identify stocks and ETF stocks that will allow us to begin out profiteering.
On a side note, these are all industry groups that perform well when the economy is about to go into recession.
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