Part IV – Strategy

In part III yesterday, narrowing this experimental screen (Emerging Relative Strength) down to the overweight stock belonging to  a sector that is also overweight,  I narrowed our list down to 14 stocks. Certainly not too many to follow.

Ticker Full name Sector
UAN CVR Partners Chemicals
INVE Identive Group Inc Computer Hardware
CDNS Cadence Design Systems Computer Software & Services
TTWO Take-Two Intera Software Computer Software & Services
BAH Booz Allen Hamilton Holding Corp Diversified Services
ARX Aeroflex Holding Corp Electronics
IPGP Ipg Photonics Corp Electronics
KLAC Kla-Tencor Corp Electronics
MCRL Micrel Inc Electronics
MXL Maxlinear Inc Electronics
RMBS Rambus Inc Electronics
VSH Vishay Intertechnology Electronics
MRTN Marten Transport Ltd Transportation
YRCW YRC Worldwide Inc Transportation

We have six sector represented by our 14. Tonight the sector composite charts will be updated so you can revisit them over the weekend. The Transportation sector, as I’m sure your aware has been hot lately, with both the Dow Transports and the Morningstar Transportation sector (MG770)  both reaching all time highs. Yet YRCW is off it’s highs:


Notice the relative strength indicator box. The red showing a period of under performance. YRCW still rose but not as much as the overall market in general.  The Chandelier has been long most of the year so far (settings 14 days ATR’s 3).  We are slightly above the exit so you can gauge your risk easily enough, if you purchased right here.

Let’s look at a cheap stock ($ price not value) in the Electronics sector where there are quite a number of hits on this screen, MXL:


This is more of what I was looking for in the screen. This stock became an overweight in May of last year and has stayed there since. It is at a juncture where its outperformance should start to reassert itself or change from OW to MP and then perhaps UW but let’s not get ahead of our selves. For purposes of this screen in March it went for OW to MP (Market Perform) then back to OW.  I am really looking for a screen that will pick this stock last May, if you know what I mean.

In theory we can trade these stocks from the long side. Perhaps watch for corrections and oversold periods to buy or add to.  That’s the goal at any rate  😎 Often times I think we concentrate way too hard on how to buy rather than analyzing the risk at this point. I’ll go over this next week.

Talking Points and Why giving away our wealth has been the most satisfying thing we’ve done:

What makes a stock picker’s market? (Vanguard Advisors Blog)

Many U.S. Microbusiness Owners Depend on Second Job (Gallup)

Stop Trying to Control People or Make Them Happy (HBR)

Equities For the Long Run? Or Property? Or Neither? (MoneyBeat)

Lack of US Demand Dooms Global Trade (Alhambra)

Now There’s a 1987 Chart to Get Worried About (The Tell)

From Zynga coder to marijuana CEO (Fortune)

10 reasons why Americans ignore climate disasters (MarketWatch)

Are Walmart’s prices so low because its employees are on food stamps? (Slate)

5 ways to get the long-term jobless back to work (MarketWatch)

Physicists are building an NSA-proof Internet (Salon)

Pimco’s Gross, Facing Skeptical Investors, Discusses His Dead Cat (DealBook)

Why Facebook Should Worry About Tencent (HBR)

Construction Is Muted Because Too Many Buildings Went Up During the Boom (Real Time Economics)

Harold Meyerson: How capitalism enriches only the few (Washington Post)

Why Surging Profits Aren’t Leading To CapEx And Jobs (STA)

When Lobbying Was Illegal (Priceonomics)

Bill and Melinda Gates: Why giving away our wealth has been the most satisfying thing we’ve done

Have a great weekend!