[CANSLIM] Analysis on Industry Groups and their technical patterns

From: Andreas Himmelreich <judgejimmy@web.de>
Subject: [CANSLIM] Analysis on Industry Groups and their technical patterns
Date: Tue, 11 Dec 2001 22:23:48 +0100

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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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