The market decline from the late February 2015 highs to the March lows has reiterated the importance of picking ETFs and stocks that are acting stronger than the S&P 500. For example, the Select Sector Utilities (XLU) peaked at $48.73 in late January and had a recent low at $43.01. This was a decline of 11.7%, and as of March 17, the XLU is down 6.33% in 2015.
Contrast this performance with the Select Sector Health Care (XLV), which I discussed recently in Sector Sidesteps Correction. On a YTD basis, it is up 7.34%, which means there is a difference in performance of 13.67% between these two ETFs. During the same time period, the Spyder Trust (SPY) is up just 1.48%.
One of the stocks that I found based on the strong relative performance of the healthcare sector was Actavis, Inc. (ACT). Its weekly RS line pulled back to its EMA in early January before turning higher. As per my article, the average entry price was $265.69. Half of the position was sold at $298.30 or better and the stock closed on March 17 at $305. Often times you will get twice the return from a market leading stock than you will in the underlying sector ETF.
Since I started explaining my relative performance several years ago, it has become quite popular again, even though it has its roots in the 1930s. My approach, I believe, is unique and is one that anyone can apply if they are willing to do the work.
Therefore, I thought a detailed analysis of some of the top performing stocks or ETFs over the past three years might illustrate how market leaders often go through three distinct phases.
One of the top performing ETFs in 2012 was the iShares Home Construction ETF (ITB) as it was up 79.36% versus a 15.99% gain in the Spyder Trust (SPY). As most traders are aware, the weekly analysis is more reliable than the daily analysis and I will concentrate on it in this article.
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