Ask Colin

Is rebasing the sector indexes to the All Ordinaries Index and stock charts to the sector indexes an efficient and effective way to select strong stocks for buying and weak stocks for shorting or avoiding?

What rebasing does is recalculate all the data from a certain point on the basis that its value then was 100. This means you can validly compare one index or one stock with another.

What you are describing with the sector indexes sounds like a simple form of top-down stock selection. It is normally done before you look at the stock charts, but I suppose you can do it in reverse order. But why? The whole point of the top-down approach is to first sort out strong sectors and to then look for strong stocks within the strong sectors. I would then focus on the stocks that come up, rather than look at hundreds of charts first and then do a top-down analysis of what you had selected.

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