There are a several tools available to analyze a sector. First and foremost, chartists can analyze the price chart for signs of an uptrend or downtrend. Second, chartists can create a Price Relative in the indicator window to gauge relative performance. This indicator is simply the sector price divided by the S&P 500 (or another benchmark). This ratio rises when the sector outperforms and falls when the sector underperforms. Third, chartists can use the exclusive StockCharts Technical Rank (SCTR), which measures relative strength. In general, SCTR scores above 50 show relative strength, while scores below 50 show relative weakness. And finally, chartists can analyze the Bullish Percent Index for the sector. This indicator measures the percentage of stocks on P&F buy signals. A rising BPI is positive, while a falling BPI is negative.
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The chart above shows the Technology SPDR (XLK) with some basic price chart analysis and all three indicators. First, the trend is down because XLK broke support in early May and has yet to break above resistance (negative). Second, the Price Relative broke down in mid April and has yet to break resistance (negative). Third, the SCTR is well above 50 and has not dipped below 70 since September 2011 (positive). Fourth, the Technology Bullish% Index ($BPINFO) is in a downtrend, but oversold and flattening out (neutral). Overall, the bulk of the evidence is bearish for XLK. Three of these four need to be positive before considering XLK bullish again. You can read more about these indicators in our ChartSchool: Price Relative, StockCharts Technical Rank (SCTR) and Bullish Percent Indices (with available symbols).