Before you buy a stock, first examine its industry index to determine if the sector is in an up trend. You will increase your winning percentage because being in the right sector is just as (if not more) important than picking the right stock. Here’s a simple technique to determine whether a sector is in a bullish mode and a stock purchase is advisable:
Calculate a 50-day moving average of the industry index.
Buy the stock only when the sector closes above its 50-day moving average.
–Manuel Ochoa, from the TRADEHARD.COM Guide to Conquering the Trading Markets (1999, M. Gordon Publishing, Malibu, Calif.).