Although there are various websites and programs used to find strong and weak industries and sectors in the market, I use Prophet.net and compare results with Investortools. I do deep analytical scans the first weekend of the month and then cursory updates as needed (or desired) on the weekends if I’m not satisfied with potential candidates.

Here is a step-by-step guide to using Prophet.net’s Industry Strength Scan toolbar.

You do need an account to do this effectively, and signing up is free (I have no affiliation with Prophet.net). A membership fee page is here. Basic service is $20 a month.

1. Click on the EXPLORE tab (top of the page – reddish orange)
2. On the little orange menu bar, click on INDUSTRY RANKINGS <—-link is here
3. A table appears which describes broad trends in numerical form – default is 6 months and can be changed as desired
4. Click on SEE HISTORICAL TRENDS for the graphical (color) chart — the default now is 1 year. Alter this as needed
5. I generally change the period to 3 and 6 month trends depending on my purpose for scanning
6. On the left side of the page is an explanation of how to read the chart properly

That covers how to view the trend charts and institutional money flow charts I post at times.

Now, that’s great and all, but how about using the table to find strong and weak stocks right now?!

Here is the procedure for scanning many charts quickly to find a strong watchlist of stocks:

1. Click on any of the NAMES of the Industry Groups on the left. Generally scan the top 5 and bottom 5 and any interesting prospects you see.
2. This brings up a list of all the charts of the companies in that group (the “stocks” bar tells you how many companies)
3. Click on CHART CONTROLS to setup the charts the way you prefer them (it remembers your preferences if you sign-in
4. I use the following: Six month charts, candlesticks, daily, simple moving averages 20, 50, and 200
5. Next (important) go to FILTER CONTROLS
6. Filter down as desired – I use ‘average volume’ = 400,000 and ‘minimum price’ = $25. Use your own filters
7. View the general trends of multiple charts
8. Make note of any ‘outstanding’ stocks up or down and view them with your normal charting program/website

Here’s an example of a “strong stock” from a “strong industry” as displayed in the chart scan screen:

A couple of notes from personal observation:

• Stocks in strong industries tend to show greater relative strength and vice versa for weakness
• Money flow is graphed left to right (date-wise).
• The ideal pattern is red on the right, yellow in the middle, green on the left. This shows money is flowing IN to the group.

The “26″ means it was in the 26th percentile of all stocks, then moved to the 47th and 62nd percentile, and now it’s in the 90th percentile.

• You will generally find the above pattern in the upper-middle of the chart.
• Ignore industry groups with less than 10 stocks in it. One stock can skew the results and provide erratic chart jumping behavior
• Clear industry flow with a great number stocks in the industry tends to provide more reliable signals and candidates
• This is no magic bullet system. You still need to overlay candidates into your system and practice money management/risk control.
• There are always stocks on runaway uptrends and dismal downtrends no matter what the general market is doing. Always.
• It is probably best to stay away from the ‘muddy middle’ of the chart because there isn’t much interest
• For short candidates, scan the opposite pattern where money is flowing OUT of an industry
• You can test your ideas historically simply by clicking on a date on the top of the chart (below the months) and the chart will refresh with that date as current and you can scan and see what ‘would have happened’ if you made decisions based on the readings of a particular date.
• You can alphabetize industry groups by clicking on “Industry Group”
• There are so many ways you can use these scans. Experiment.