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Registered User
Joined: 4/5/2005
Posts: 45
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There is an advise that I often hear but never understand:
"Normally one would select strongest stocks in the strongest industry , reverse for shorts",
What is the strongest industry? The one, that is up more for the last month than the others? Or may be the one that is just about to break up out of the long consolidation?
In the first case it could be too late to get in.
And what does it mean "the best stock in the industry"? The one that is up most? Or the one that is about to make a move? Or any specific chart patterns?
Could anyone name current strongest and weakest industries for swing trading as an example? And the strongest and weakest stocks within them.
I think it would be very interesting to hear different opinions.
Thanks,
mmlmedv
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Registered User
Joined: 1/28/2005
Posts: 6,049
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The best example I could give you is the commodities/energy
boom that took place in the 2003 to 2006 period.
Look at stocks like:
TIE
CCJ (metals)
LNG
SWN
RRC
VLO
DNR (energy)
during that period. (there are too many to list)
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I currently have as the strongest groups:
Utilities
Telecom
Consumer Staples
Software
Retail
Strong stocks in these strong groups will be traded like any
other. Pullbacks, breakouts, trend, counter trend, technical
indicators, and so on.
Typically strength will be measured in periods of from
100 days to 6 months to 1 year.
(typically by percent change)
Thanks
diceman
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Registered User
Joined: 4/17/2006
Posts: 271
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Thanks for raising these questions. As a relative newcomer, I must admit I've wondered about these issues, but never actually got around to really understanding them.
IBD says, " Studies show 37% of a stock's move is directly tied to the performance of the industry the stock is in. Another 12% is due to strength in its overall sector." (Industries are composed of sectors.)
Doing a search on this website, I found the following:
How do I scan for the strongest industry groups?
(Which includes Tanstaafl's method outlined in 4/23/2002 Worden Report)
Uncover the stocks driving the strongest industry groups
Identify sectors gaining momentum over the past few months
Use Comparison and Relative Strength graphs to compare a stock to the rest of its industry group
Using the Industry Menu to analyze stocks relative to their industries and sub-industries
Sorting Stocks by their Absolute or Relative Performance
You can also go to "Swing-trade-stocks" website and search "Determining Relative Strength" for a few good articles.
(URL removed by moderator) has an excellent depiction of industry/sector/stock performance in their "Market Carpets".
(Now I'll go read.)
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Registered User
Joined: 12/21/2004
Posts: 902
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I just want to add that I personally consider volume increase in addition to rising prices as a key component of strength.
At some point in my screening, I always do a sort to narrow down the universe under consideration to those stocks/sectors with a rising price over a set time period and a rising volume (I measure by change in 45 day ma) over the same time period. Obviously I don't want stocks/sectors with lower prices/higher volume, and I don't consider rising prices/lower volume to be indicative of strength.
If I arbitrarily choose say, 10 sectors or stocks as "strongest", I pick the top 5 price gainers (as long as they have rising volume) and the top 5 volume gainers (as long as they have rising prices).
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Registered User
Joined: 4/18/2005
Posts: 4,090
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I look at the Hemscots... but it's kinda forced. And i' not that great at analysing them. I had an idea for certain market conditions to scan for subindustries crossing up through a moving average.. say 250 day then populate a list with all those stocs. then sort out those that are near their 100 day moving average... say with in 5%. This left me with a list of several hundred then I narrowed it down to those with identifiable botoms and about to cross up through or have already crossed up through and held... then other criteria... RSI position on a 3 DAY CHART TSV with in X% of centerline ... just whittling it down to come up with a core of stocks that I think will be strong tradeable trendlines for the next several months to year.
I also made some scans that scan for instutitional activity based on BOP< RSI, and other requirements and when that scan surges in numbers i sort by industry group... you'll find that it will be weighted heavily towards certain sectors. right now allot fo biotech comes up, some software , some medical.
I like to look for bottoms.. Where do good trendlines come from? A bottom. It's all about buying low and selling high, but trending strong works well also. In one of Dons books he talks about how the longer a trend line continues the less time it has left. Also consider sector cycles... they tend to last a few years at least. Anytime markets make a drop like recently sort the Subindustries to see which ones defied the market... generally that can show the sectors that are showing strength right now..... then look at the charts and decide if you think it can continue or not.
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Registered User
Joined: 12/2/2004
Posts: 1,775
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The current #1 industry group (out of 197) per IBD is Chemicals-Fertilizers. It's a small group of only 13 stocks, ranked in order of overall strength (not just pure price strength) the top 5 stocks in the group are SQM, POT, LXU, AGU, TNH. Often times many of the stocks in those very highly ranked groups are extended beyond ideal entry points, but the key is to watch them as they form lateral bases and offer new buy signals. FWIW and just for fun the absolute worst/weakest industry group is Elec-Contract Mfg., with 27 stocks...its strongest overall stocks are LB, PLXS, CTS, BHE, FLEX. But strong is an oxymoron in that group:)
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Registered User
Joined: 12/21/2004
Posts: 902
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I have 2 additional points to make - besides IBD that fpetry brought up, there's a great site called (URL removed by Moderator), that also divides stocks into "sectors" and then ranks each sector by a formula they have that shows strength based on some combination of price and volume during the past 6 months. Look at the Sectors performance page and they rank the sectors by change in each day, month, 3 months, 6 months, and YTD. Click onto each sector and it will list each stock within the sector as well it's special Barchart formula value. They also do separate analyses of each stock based upon a multitude of technical indicators - very informative and interesting site.
And I kind of hate to bring this up here, as we are all dedicated technicians (more or less) - but keeping an eye on things such as commodity prices can give clues as to when sectors based upon those commodites are strong. For example, copper is literally EN FUEGO right now - and all of the copper companies have been enjoying a great week. Doing a little bit of research shows that copper prices are currently at 5 month highs - and it's showing in the strength of the sector. Nickel and molybdenum prices are also very high right now, so general industrial metals sectors should be strong too.
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Registered User
Joined: 4/5/2005
Posts: 45
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Thanks every one for responding to my question. I was out of town for several days and now need to go through each opinion to learn some.
Thanks again,
mmlmedv
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