Sector Investing

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Determining Trend Strength for the SOX and SMH using ADX and Aroon Indicators vs the NAMO:





On the ADX the level of the black line indicates the strength of the trend. That is to say the higher it is, the stronger the trend. Usually, when it is below 20, this suggests that we have a trading-range market while if it is higher than that, it suggests a trending market. The direction of the trend is indicated by the -DI and +DI indicators. When +DI is above -DI, the trend is up; when -DI is above +DI, the trend is down. You would notice how when the trend is weak (i.e., ADX is below 20), +DI and -DI often flip-flop around each other.

Another indicator which can be used for this purpose is the Aroon. When the red line (AroonDown) is above the green line (AroonUp), the trend is down; when the opposite is true, the trend is up. The strength of the trend can be measured by the distance between the two lines. These explanations from Vesselin

I only took minor liberties and added the NAMO chart which is suggestive of an overbought market above the horizontal line at 25 and suggestive of an oversold market below -25.

RtS