Updated on March 3, 2023
Bellwether is a stock or index and is considered to be an indicator of the direction of the broader market. It is usually a well-established large-cap company that is considered to be a bellwether stock and is said to be representative of a particular sector or industry or the overall market.
How to use bellwether stock?
It is assumed that a bellwether stock as an indicator is that its performance is thought to reflect the health of the broader market. When such stock is performing well with an increase in its prices, it can indicate that the broader market is also performing well. Similarly, if such stock is performing poorly with a decrease in its prices, it can indicate that the broader market is also not in a good shape.
Can Bellwether be used as a standalone indicator?
It is not advisable to use the bellwether stock as a standalone indicator. Traders can use bellwether stocks in combination with other technical analysis tools like price and volume analysis, trend lines, and support and resistance levels. This will help to gain a better understanding of market trends as well as potential trade signals.