Looking For Strength In Dicey Market Environment
After starting the month with days of frantic selling fueled by Covid-19 and Fed fears, traders are anxious about what lies ahead. Like travelers checking the forecast during bad weather, savvy traders turn to the charts and indicators to navigate the dicey roads of this volatile market.
In this environment, Simpler’s Traders look to relative strength indicators to identify which tickers might rise first as the market fights through the headwinds. These tools also indicate if there is relative weakness to an asset heading in the unwanted direction.
A relative strength indicator measures stock or index performance against the broader benchmarks by comparing simple percentage changes. For example, if an index is up 1% and a stock is up 6%, this would indicate positive relative strength.
With literally thousands of stocks available for traders to consider each day, it is difficult to find solid opportunities without such tools and indicators.
The indices have managed to hold their overnight lows into January. That’s a good sign in the midst of shaky market confidence. The jury is still out whether indexes will continue to hold. As traders glance across the bigger picture of the market, indicators are the tools of choice to better understand which tickers are trading higher or lower.
Will there be follow-through in the market that sets off new rallies? That remains to be seen. Simpler’s traders continue to watch for rising momentum in the tickers for good buying opportunities.
Trends generally kick off when large amounts of institutional funds flow in and out of the market. Institutional investors represent pension funds, retirement accounts, and large investment firms. Retail traders generally follow the influence of trend-setters after noticing distinct changes in price action and momentum.
Relative strength indicators help open up trading possibilities to Simpler’s traders by finding companies early that are in this stage.
Simpler’s traders follow an adage, “The trend is your friend.” It is yet to be determined how friendly this market will be in the new year.