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July 3, 2000
It has been said many times that when investing in stocks, buy the leaders and not the laggards and buy the stocks that are showing strength against the market and against other stocks in their industry classification. Buying weak stocks is like gambling. Sometimes they do go up and you make a killing, but most times stocks are not performing for a reason. The have fallen out of favor with investors because of a poor earnings report, a significant downgrade from a major investment house, a competitor has announced a breakthrough product advancement or investors' interest have turned toward another "hot" industry.
When researching a stock one of the more important things to do is to compare the strength of the stock against other stocks involved in the same industry. Secondly, you will also want to compare the stock against the Nasdaq, DJIA and the S&P indices. Always look to invest in stocks that are outperforming other stocks in their industry and outperforming the major indices. You also want to check their moving averages for the short and long term trends (see related article).
To compare the strength and performance of stocks against one another and against the different indices, use Big Charts. After finding the stocks you think you want to compare got to www.bigcharts.com and follow these instructions or try this example:
- Go to www.bigcharts.com
- At the top of the opening page, you will see an entry box for a stock symbol. Enter the stock symbol ORCL (Oracle) and click the "Interactive Charting" link.
- On this new page you will see the stock chart for your selected stock. In the left hand column of the new page, you will see a "compare to" link. Click on this link and click on the "time frame" link.
- Under the "time frame" link, you will find two entry boxes, one for time and one for frequency. Using the "time" drop down box, select 3 months and leave the frequency box as "daily". You will now be able to compare your selected stock's performance over this time period.
- Under the "compare to" link, you will find two entry boxes, one for Indices and one for stock symbols. In the drop down box for Indices select Nasdaq. You now can compare your selected stock's performance against the Nasdaq's performance over the same period of time. Click on the "draw chart" link.
- You will now see the graph produced showing you the performance of ORCL (Oracle) as compared to the Nasdaq. If you look carefully, you will see that, although ORCL has gone down and back up mirroring the Nasdaq's rise and fall, it has fallen less and gone up more relative to the Nasdaq's overall performance.
- You can try this example by entering a stock in the "symbols" box instead of comparing to an Index.
Big Charts also offers a number of other indicators, comparisons and styles of charting that you may find helpful for your research.
Using comparison charting will let you see a bigger picture of a stock's strength relative to other stocks within its industry and against the overall markets. Armed with this information, you should be able to seek out investments that will continue to perform and amaze your friends when their stocks have all tanked far worse than the market.
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