Sector Trends Calculations
Sector trend is a study of the change of momentum applied to sector and industry group indexes and individual stocks to calculate the direction of a trend and measure the trend's strength. The study is completely independent of how the sector and industry indexes are calculated or weighted, and the volume data is not part of the calculations. Using a proprietary combination of widely used formulas such as standard deviation, moving averages and average true range values, the sector trend study seeks to identify the trend in a sector or industry index or an individual stock.
Once a trend is identified, the strength of the trend is derived by normalizing the average true range of the underlying index or stock. This normalization provides trend and strength values that can be compared between the underlying Index and the stocks listed in that index.
Each bar represents the strength for each day
When you're looking at the Sector Trends tool, the trend values range between -100 to +100. Any values between 0 and +100 denote strength or positive momentum and are assigned a green color. The more the trend value increases toward +100, the stronger the perceived trend. Any values between 0 and -100 denote weakness or negative momentum and are assigned a red color. The more the trend value decreases toward -100, the weaker the perceived trend. When the trend is not discernible (usually when the value is very close to zero), it is considered to be neutral and is assigned a yellow color.
The area between 0 and +100 is divided by four lines. The first line above zero is +25 and the second, darker line is +50. The next line is +75 and the final line is +100. Similarly, the first line below zero is -25 and the second, darker line is -50. The next line is -75 and final line is below zero -100.
Strength is indicated when the bars are:
a) Above the zero line and
b) assigned a green color and
c) the value is greater than +25 (first line above zero)
If the green bars are continually reaching new highs, the trend or positive momentum behind the sector, industry or stock is gaining.
Weakness is indicated displayed when the bars are:
a) Below the zero line and
b) assigned a red color and
c) the value is less than -25 (first line below zero)
If the red bars are continually reaching new lows, the trend or negative momentum behind the sector, industry or stock is gaining.
For additional information about a specific trend, click the drop-down icon to generate an auto analysis.
The analytical tools and examples described in this article are for information purposes only and their use does not guarantee a profit. None of the information provided should be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security. Investors should fully research any security or tool before making an investment decision. Securities are subject to market fluctuation and may lose value.
Illustrations are hypothetical and do not reflect actual investment results or guarantee future results. Past performance of a security or strategy does not guarantee success in the future. Results could vary significantly and losses could result.
Market volatility, volume, and system availability may impact account access and trade execution.