Industry Group Relative Strength

The Importance of Industry Group Relative Strength

Knowing which Industry Groups the Institutional Money is flowing into and out of is very important to recognize. If your invested in Stocks that reside in low Relative Strength Industry Groups then they may remain poor performers until that Industry Group shows signs of increasing Relative Strength. Sometimes it can take many months or even a few years before an Industry Group will finally begin to show signs of life.

Lets look at a couple of Industry Groups over the past few years and see how they compare based on Relative Strength and Price Performance. The Gold and Silver Sector has been very strong since the first of the year which has been reflected in its Industry Group Relative Strength and Year to Date price Performance.

Notice how this Industry Group was strong in the Fall of 2001 but gradually became out of favor in November and December of 2001 as the Groups Relative Strength dropped to 8 (highlighted in blue). However things began to change by January as the Group’s Relative Strength began to increase and has been very strong since February with values consistently in the 90’s (highlighted in red).