This is how I use Stock Bee's 4% Breakout strategy to spot Sector Rotation.
I caught the Insurance & Fertilizer sector breakout using this.
"To create quality, you have to create quantity first." ~ Anonymous
So you wanna know which sector(s)/group(s) are gaining strength today in the market?
I will tell you the most direct way to know this.
Look at this list:
“>4% movers”.
I will discuss the logic behind why this works.
Tell you how I caught insurance (and fertilizers) breaking out.
And link the scanner so that you can run it every day.
And my 4% movers dashboard for the premium readers.
4% move = Bullish
Most stocks don’t make a >4% move on a given day (large caps rarely do).
In their whole journey, they move more than 4% probably <20% of the time (I made these statistics up. But go figure).
So when they do, it means that there is STRENGTH.
Now when you see more than 20-25% of stocks from the same sector moving more than 4% on the same day, and continuously for a bunch of consecutive days.
What does it tell you?
Yes, sectoral strength. The whole sector/group has STRENGTH.
As simple as that.
Now I say 20-25% and not 20-25 stocks.
this is important.
Because a group/sector with ~300 stocks (FMCG) having 20 stocks in the >4% movers list; is not the same as one with ~40 stocks (Banks) having 20 stocks on the same list.
How do you check >4% movers?
Run this >4% scan below:
There are 55 names today.
You can also download the list to see the sectors.
what do you see?
I see Realty:
But this doesn't tell you about the %.
This isn’t good.
What % of realty stock made a move of 4% or more?
That’s the real sauce.
So ~16% of realty stocks (3rd column) made a >4% move. This isn’t very high but decent. Only media had more % of stocks that moved >4% today (~17%).
PS: A high fidelity metric better than >4% movers is the Net 4% movers (4% up - 4% down column 2).
Why?
Because a strong group will also have less number of -4% breakdowns.
The next question is: Is this a new strength or a continuation strength?
There are a couple of ways to answer this.
See % stocks that made Net >10% in a week?
Who tops?
Media and Realty. less goooo….
Meaning they are outperforming for at least a week.
What about before that?
For this, you have to run the scanner every day and develop a memory.
Remember, you aren’t looking for a quick fix, but a system.
A 5-day average of Net 4% movers will then tell you the general strength of the sectors.
From the figure below:
Telecom(Man City blue) and Realty (green) started outperformance with big spikes post-late October selling.
So these are continuation strengths.
While Media (deep Blue) is a recent strength.
Oil (purple/magenta) was strong before the late October beating and has started to show strength again.
You see.
The simple 4% data can be beaten up in so many different ways and presented to gain insights into group/sector/industry strength.
How did I find the Insurance and Fertilizers sector?
Well, chartink does not have a group called insurance.
And so I detected that manually.
For fertilizers, chartink does have an industry-wise classification and so a high % of chemicals with a net 4% jump told me that the sector is hot.
Similarly, you can also see which sector is the worst.
It’s Sugar today and so was yesterday.
How do I know?
I go through this scan every day mate, that’s how.
Summary:
To sum up.
(-)4% movers data is the primary data that tells you about the strength of the stock.
When looked at it, at a sector/industry level. It can tell you about the strength of that particular sector/industry.
Following this data every day/week will help you catch the START of a sectoral/industry move as well as the start of a sectoral/industry breakdown (sugars now).
That's all for today.
I am linking the Net 4% movers dashboard for my premium readers at the end of the article.
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