Education & Information
Bullish Percent Charts
Sector Bullish Percent Charts
After analyzing the market indicators, the next step in a disciplined investment process is determining which industry sectors to focus on and which to avoid. Chartcraft, and the good people that run it, have been on the forefront of developing sector bullish percent (BP) charts. The market is divided in to 43 broad sectors. This breakdown is provided by Chartcraft.
The majority of stocks in a sector tend to move in the same direction. Different industry sectors will rise or fall for completely different fundamental or economic conditions. For example, the Drug sector will move for completely different reasons than the Semiconductors, which will move for completely different reasons than the Banks, etc…
You want to have some sort of reliable indicator to help you determine when demand begins to take control in a sector and a trend is emerging. Sector BP charts provide just that, clearly showing when a positive imbalance exists in a sector’s supply and demand relationship allowing you to participate early in a sector’s advance. As the momentum of the sector increases, more and more money gets attracted to it and it will continue to rise as long as the imbalance between supply and demand persists.
After a mature advance in a sector the media tends to report about the major move underway within the industry. That tends to bring in the individual investor who uses these reports as a catalyst to buy. Eventually, every investor that wants to own stocks in the sector have done their buying and the demand will weaken creating a balance in the supply and demand relationship and the trend will come to an end.
Eventually, some selling will appear and once all the demand is exhausted the supply to overtake the demand and prices begin to move down. The entire cycle process begins again, only in reverse this time. Sector BP charts clearly show when supply is beginning to take control of a sector providing you a reliable indication to sell or to avoid buying in to a high-risk sector.