TRADER'S NOTEBOOK

Sectors move tangentially and then opposite to each other.
The beginnings and ends of cycles do not happen abruptly.
Paper trade a few stocks from each sector. You get to know
something by seeing it.

The dollar is interest rate driven and interest rates are
set by liquidity cycles (there is that word again, round
and round we go) and liquidity cycles are economics driven.

So what economic cycle are we in?

Sector Stocks - Stocks are grouped into different sectors
depending upon the company's business. We have posted a
chart showing the 11 different sectors. Sector Cycles.
Healthcare, utilities and consumer cyclical, are considered
defensive sectors, while the rest tend to be more cyclical
in nature. The stock prices of cyclical and non-cyclical
stocks relate to how the business cycle changes. Cyclical
stocks move more dramatically, both up and down, with the
cycle, while non-cyclical stocks show little movement
relative to the cycle, for example, utilities.

Cyclical Stocks are classified according to how they react
to business cycles. Cyclical stocks are stocks of companies
whose profits move up and down according to the business
cycle. Cyclical companies tend to make products or provide
services that are in lower demand during downturns in the
economy and higher demand during upswings. The automobile,
steel, and housing industries are all examples of cyclical
businesses.

Defensive Stocks are the opposite of cyclical stocks: they
tend to do well during poor economic conditions. These are
companies whose products and services enjoy a steady
demand. Food and utilities stocks are defensive stocks
since people typically do not cut back on their food or
electricity consumption during a downturn in the economy.
Defensive stocks tend to hold up well during economic
downturns. Performance during upswings in the economy tends
to be lackluster compared to that of cyclical stocks.

Identifying a sector that is rotating into favor, and
finding a leading stock of that group isn’t magic but it
does take some work and knowledge.

Everyone will have their own criteria and preferences, and
you must follow your own direction when trading. Trading is
like life, plenty of methods. Like life, we always have to
be ourselves. Successful trading is the art of using
knowledge at the right time. Not to follow all systems all
the time. Read More - Stock Market - Price Cycles