Telltale Signs of Sector Rotation
Sentiment and fundamentals are often late in predicting turns in a sector, writes Tom Aspray, but using the boom and bust cycle in the homebuilders, he identifies technical signals that can be used to get in and out ahead of the crowd.
Sector analysis has always been a key part of my stock selection process, and I have spent quite a bit of time studying sector patterns and developing technical tools that can help identify when to get in a sector and when to get out.
There seem to be some common phases that sectors go through regardless of whether you are looking at long- or short-term trends. Being able to identify these phases can add clarity and objectivity to your analysis.