Trade Lesson: Monitor Relative Strength And Weakness For Profits
When looking at stocks, always take note of two things. First, look to see how the market is behaving. Is the market strong or weak? Second, analyze the strength or weakness of any one particular stock. More often than not, you can tell the future stock movement by doing these two simple steps.
Let's take a look at Apple Inc. (NASDAQ: AAPL). On Friday, the stock ended the day slightly lower. However, the market was extremely strong. What does this tell us about Apple? When comparing the two, it shows that Apple is weak relative to the overall market. Simply put, if Apple cannot even catch an up move on a big rally day, what are the odds it will head higher in the coming days. Little to none. A conclusion should be reached that Apple will head lower.
This conclusion reached on Friday was confirmed today. Apple Inc. (NASDAQ: AAPL) is trading at $445.37, -8.25 (-1.82%). Notice how not only is Apple lower on the day, but it is down 1.85% with the NASDAQ just down 1%.
This same method could have been used on any stock on Friday, including Amazon.com, Inc. (NASDAQ: AMZN) which was also down on Friday. The stock is down almost 2% today.