Sector rotation is a strategic approach that involves shifting capital between different sectors of the economy based on their expected performance relative to economic cycles or market conditions. This strategy recognizes that sectors can exhibit varying levels of strength and weakness at different stages of the economic cycle, influencing their profitability and investor sentiment. By actively reallocating assets, investors seek to capitalize on sectors poised for growth while minimizing exposure to those likely to underperform.

Identifying sector rotation opportunities begins with categorizing stocks into sectors and analyzing two critical metrics: percentage change from the previous month’s close and percentage deviation from the 200-day moving average (DMA). The percentage change indicates short-term momentum, highlighting sectors experiencing price appreciation or depreciation. Meanwhile, the deviation from the 200 DMA offers insights into long-term trend strength; sectors with stocks trading close to this average suggest stability, whereas significant deviations may signal potential reversals or continuation of trends.

To effectively implement sector rotation strategies, analysts monitor these metrics across sectors over time. Sectors showing consistent positive changes from the previous month and stocks trading near their 200 DMA are often considered strong candidates for attention. Conversely, sectors with negative changes and stocks deviating significantly from their 200 DMA may indicate a need for further evaluation or adjustment of focus. This analytical approach enables analysts to adapt their perspectives dynamically, aligning their strategies with evolving market conditions to optimize screening and manage risks effectively.

Analyzing Metrics with the Free Fatafat Stock Screener.
The Fatafat Stock Screener facilitates a systematic analysis of these metrics across sectors. For instance, tab2/Column I reveals the short-term momentum of stocks within sectors, indicating whether prices have appreciated or depreciated over the past month. Meanwhile, tab2/Column H provides insights into the long-term trend strength by showing how much current prices deviate from the 200 DMA.

Please search for the correct corresponding column headers in the premium version.