How to Use Sector Analysis for Stock Trading - Candlestick Patterns Explained by TechniTrader®

Understanding the Overlapping Cycle of the Super Sectors

The Financial Markets use different Sector and Industry formatting than Economists. The Dow Industrial Average was established based on the economy theory of its time when there were 30 major Industries in the US, while for the Stock Market today, Economists use 31 or 32 Industries. The Financial Markets use a totally different approach. Their list of “Industries” totals 146 unique and specific Industries.

Those Industries are grouped by Sectors, which include Basic Materials, Communication Services, Consumer Cyclical, Consumer Defense, Energy, Financial Services, Healthcare, Industrials, Real Estate, Technology, and Utilities. From this list, the Super Sectors are derived, which are Super Sector Cyclical, Super Sector Defensive, and Super Sector Sensitive. Then, within each Super Sector is contained 3–4 Sectors.

In order to use Sectors as stock trading strategies for finding excellent stocks to trade, Sector Analysis must start with understanding the overlapping cycle of the Super Sectors and whether or not that cycle is peaking, toughing, or harmonious.

The theory behind the Super Sectors is that these different groups of Sectors and Industries have a specific and clearly definable cycle that overlaps. The Defensive Super Sector is supposed to lead the market out of a Bear Market with those stocks bottoming first, followed by the Cyclical Super Sector Industries and their stocks, and lastly the Sensitive Super Sector with its Industries and stocks. If the cycle is functioning properly and each Super Sector is at a different place in its overall cycle and trend, then it is easy to choose the Sectors and Industries to focus on for that year.

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Trade Wisely,

Martha Stokes CMT

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses