I was talking to some traders recently who were upset that the companies they held were not doing well. At the same time the markets were lower and the question I was asked was how much the market was influencing the performance of the shares. Fortunately there is a very simple way to answer that question using Market Analyser and the Overlay Security function.
A rising tide is said to lift all boats, so if the market is going up most shares go up and when the market is falling most shares go down. The overlay allows us to pick out the true performers by comparing their performance to the market.
From the Standard Indicators list, click on Overlay Security, then type in the XCode of the security you want to compare to. .AXJO is the Aussie 200 index which is representative of the Australian market. You are not limited to comparing your shares to the market as a whole, you could compare your shares to the sector, gold or even another share.
In the overlay chart above of BHP versus .AXJO you can see that BHP follows the index very closely. This is hardly surprising given that BHP makes up 15% of the index, so a move in BHP will have a significant impact on the index.
Consider the performance of some other shares that have recently featured in the ASX Company News section of the Trader Dealer blog.
Castlemaine Goldfields (CGT) was certainly outperforming the market strongly through July and August, but currently is falling in line with the market.
Sedgman (SDM) fluctuated between strong outperformance in August to underperformance during late September.
GoConnect (GCN) is currently outperforming the market quite nicely.
We can compare sectors to the index as well and the two strongest performers at the moment are the Health Care and Consumer Staples sectors. These sectors are considered defensive, with investors buying into these sectors when they fear that the economy is weak, because regardless of how bad things get we all have to eat and when medical attention is required it is not usually a choice.
You can use the Overlay Security tool in Market Analyser to strip away the forest so you can examine the trees that are ripe for harvesting.
By Jeff Cartridge