How to use Top Down Approach for Stock Selection ?
Concept : Relative Strength
Weak Vs Strong Sectoral Analysis
Weak Vs Strong Stock Analysis
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Step 1 : Choose the Strongest Sector
Use The concept of Relative Strength to identify Strong Sector .
Example Comparing Auto Vs Nifty
Here we can See the 65 RS line is Positive and Increasing meaning A outperformance of AUTO index
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How to Apply RS and How to Use It ⏬
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Look For Strongest Sectors
Like : PSUBANKS , AUTO and INFRA
The RS line Should be Preferred Sloping up
Use 65 RS for Short Term and 130 for Midterm Holding
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What do Weak Sectors Look Like ?
Nifty : Pharma Fmcg It
This Sector Should be completely AVOIDED for trading as the whole sector is underperforming
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Now As we have Selected The Strongest Sectors
Lets select the Strongest Stock in that particular Sector Using Stock Vs Sector Analysis
Outperformers : Canara Bank , SBIN
RS settings
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Underperformers are stock that dont even give benchmark returns
PNB bank , Karnataka bank
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Similary in AUTO sector Some Stoccks will be weak and some will be strong .
Bet on the winning hose and not on loosing horse by identifying outperformers .
Example :
Hero Vs Maruti
Which Stock to Select ?
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