Where's the Strength?

JC Parets
October 28, 2021

A couple of days back we were mentioning the areas of the market that looked weaker than the others.

Today, we are here to discuss the areas of the market where despite today's correction, we saw some strength.

Using relative strength charts for analysis is a great tool to have. But there is another way to look at it. When the market is correcting and certain stocks are going up, that is information. That is relative strength. And vice versa of course.

So let's take a look at the sectors that were displaying strength.

One thing to keep in mind is that in this analysis it is important to look at sub-sectors as well. There's more information when you dig in deeper. And in the market, information is money.

For instance, we shared in our post the other day that the Auto sector turned away from its overhead resistance. Take a look at the chart below:

The price failed to move past its prior highs and is still trading below it.

Now when we get into the sub-sector analysis, we see the following image:

Auto Ancillary as a group has been an outperformer within the Auto sector. If at all, this is the sub sector that's contributing to the Auto index in a positive manner. When we look at the custom ASC Auto Ancillary sector, you see a series of higher highs and higher lows. That's where our trend is!

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Similarly, take a look at the Breweries and Distilleries custom index below:

The ratio is moving higher with momentum. There is a sharp move that can be seen post the base breakout.

Up next, we have the Cement Index. Now the interesting thing about this is that while the index doesn't look out and out positive, the stocks performed well on a down day like today.

Again, the point to focus on is that on a given day when the market is performing poorly, and certain stocks or sectors are doing well, that is relative strength. These are signals to look out for that can help us wade through turbulent times.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team

 

 

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