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Comparative Relative Strength (not RSI) and sector rotation play a big role in my stock selection. There are tools called RRG Heatmap available online for sector rotation. StockCharts has one and there is also a very cool one on WyckoffAnalytics. Unfortunately they cost money. So I built my own version of a sector rotation Heatmap and figured I would make it available to anyone. Its updated weekly, it’s free, and it has worked very well for me. Check it out My version is presented as a table instead of a graph because I find it easier to read. It’s a simple way of visualizing how different sectors are performing relative to a benchmark (SPY) over time. The idea is simple: I want to see which sectors are gaining strength relative to the other sectors, and which ones are losing it. The most recent week (last week) is on the left. Sectors are assigned a number from 1 to 99 each week, 1 being the sector lagging the others the most and 99 the sector that leads. It’s not a buy or signal — it’s a context tool. I look for long trades in sectors where money is flowing to, and I look for short trades in sectors where money is flowing from. Knowing which sector is leading doesn’t always mean buying in that sector. When a sector has been leading for some time, there is a greater chance of finding stocks that are at the end of an up move rather than at the beginning. I find the best trades are often found when a sector starts to improve or starts to fall. This helps me stay aligned with institutional rotation instead of fighting it. On the image above, we can see how XLC (communication services), XLK (tech), and XLV (healthcare) are slowing down relative to the other sectors (See how the numbers go down week after weeks). Those would be sectors where I’m looking for opportunities to short. For this I can either follow the sector ticker itself or drill down and check individual stocks in that sector (the Tickers I used are sector etf). Do you use sector rotation in your trading? if so, what do you use to follow the rotations? submitted by /u/PatLapointe01 to r/technicalanalysis |