Re: [CANSLIM] Analysis on Industry Groups and their technical patterns

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] Analysis on Industry Groups and their technical patterns
Date: Tue, 11 Dec 2001 14:40:21 -0600
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Top of Thread: [CANSLIM] Analysis on Industry Groups and their technical patterns Andreas Himmelreich
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Hi Andreas,

Excellent analysis!!!!!

What you describe is extremely close to my own approach. Now that DGO is
*finally* offering industry graphs, this will be far easier to do. I've been
using another product to do this for the last 4 years, so the specifics of
my approach are slightly different as a result.

One thing I might add to your general analysis. When watching industries,
you are really looking at a couple of things. First, is it extended and/or
getting ready to top out? Looking at the industry's chart and RS relative to
the market as a whole will help, but watching the individual players and
making note of the weaker players breaking down will give an additional
clue. On the other side of the coin, once the industry has gone through a
corrective phase (in your parlance, the industry chart would show basing and
then beginning a move out of a bottoming formation), you want to start
watching for leadership. The good stocks will start moving out ahead of the
pack. Once you get a couple of participants, that may be enough evidence to
show strong movement, rather than waiting for a C&H B/O of the industry
itself. I absolutely agree with you than any candidate for buying should
come from a rising group. Analyzing ALL players in the group of
institutional quality should be part of every buy and sell decision.

Katherine


- ----- Original Message -----
From: "Andreas Himmelreich" <judgejimmy@web.de>
To: <canslim@lists.xmission.com>
Sent: Tuesday, December 11, 2001 3:23 PM
Subject: [CANSLIM] Analysis on Industry Groups and their technical patterns


> Hi,
>
> I know that I read it somewhere in WO Books that the Market drives
> individual stocks by 75% and the Industry Groups do drive individual
stocks
> as well 75%.
> That means, if the market is down (bear market), 3 out of 4 Stocks are
> usually down.
> And if the Industry is down, 3 out of 4 Stocks belonging to that industry
> are also down. Also WO states that he looks stocks in a group that are
> breaking out to before he buys a stock within this group.
>
> On Daily Graphs http://beta.dailygraphs.com you can chart industry groups
> and I think this is great -->
>
> Here is my working theorie, that I want to share with you:
>
> M (Market) --> Wait for follow through (nothing new)
>
> I (Industry) --> Look for uptrend of the Industry (Price and Relative
> Strength (RS))
> --> Look for Patterns within the RS of the Industry Group (IG)
> --> Look for Patterns within the Price of the IG
> --> Look for Patterns where the Price of a Group is not changeging a lot
> (in the handle) but the RS improves and breaks out of a CWH (or other)
> pattern or makes new highs. I found this situation several times and
> within the next days the leading stocks of the IG started to break out
> upwards.
> --> Look for Breakouts of Price of the IG
> --> Be carefull if the IG has already a RS of 99 and looks overextended
> (why not use the rubberband sell rule)
>
> Stock Selection (Oneil, Boucher)
>
> --> We all know that (RS 80, EPS 80, ROI better then 17%, Low Dept etc.,
> CWH etc.) Look for the strongest stocks in the group.
> If you missed a BO of a stock, look for the next stocks within the group
> that did not break out yet
> but has good fundamentals and a good pattern.
>
> Sceptical? Me too. But I found very good examples:
>
> Example 1) IG Bld-Resident/Commrcl -->
>
> Nice SWH (Soucer With Handle) of RS of the IG --> 09/05 - 11/30
> Nice CWH of the Price of the IG --> 09/05 - 11/30
>
> My working theorie is --> You could have been very well prepared for the
> breakout on --> 11/29, because the RS of the IG was spiking up the day
> before the breakout of the individual stocks.
>
> Further more --> NRV, MTH,  MHO, MDL, DHI, BZH broke on 11/30 (the Break
> out of Price of the Industry Group and the Breakout of RS of the IG)
> You could have grabbed RYL and CTX on 12/04 and WLS, KBH, HOV on 12/05.
>
> Further Conclusions -->
>
> - The more individuall stocks of a group break out on one day the less the
> probability that the breakout fails
> - The better the fundamentals of a stock (especially Valuation and EPS,
but
> also RS) relative to the others in their group the less the probability
> that the breakout fails (of the individual stock you choosed).
>
> Example 2) Retail Consumer Electronic
>
> Nice CWH of the Price of the Group from 09/06 - 11/13
> RS is spiking up in the Handle even the price of the group is not moving
> up.
> 11/13 was the breakout of the Group
>
> ON 11/15 (!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!) RSC broke out.
>
> Next Break out of the group was 11/26. On 11/29 ELBO broke out (!!!!!!!!
> !!!!!!!!!!!!!!!)
>
>
> Example 3) Telecommunications Equipment
>
> Kind of a SWH. Handle starts on 10/11. Price Breakout of the Group 11/13
> and 12/05
>
> Breakout of UTSI --> Breakout on 12/04 (on the next Day the Group broke
out
> again)
> Breakout of ECTX --> (better fundamentals then UTSI) 11/26 and 12/04 and
> 12/05
>
>
> Example 4) False Breakout of ADVP
>
> Broke out on 10/15.
>
> Industry Group somehow broke out at the same day or the next day. BUT RS
of
> the Industry Group was literaly flat and made now new high.
>
> I know I am very excited and above examples are just luck and the odds are
> not like I describe them here. That is the reason why I writhe it to you
so
> if some
> of you want, you can look at this deeper and try to confirm or kill it.
>
> Thank you.
>
> Andreas
>
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