Live Example: How to Benefit from Industry Acceleration.
Superior Profit traders look at multiple levels of the market pyramid structure. This structure has Country-Market at the top, followed by Sector and Industry and then Individual Stocks. Stocks may be further analyzed based on Fundamentals and Technicals. Here I focus on the Sector/Industry level with a live market example. You can use such insight not only in the USA Market but other countries as well.
The pitfall of not using Industry Rotation Insight.
Many traders don’t have the discipline or don’t have the tools to study the Sectors and Industries. They may buy Stocks in an Industry that is in peril due to macroeconomic factors, government policies, interest rate environment, technological changes, etc. The individual Stock may be healthy among its peers. However, that does not help. It ends up like swimming against the current in the river Ganges as it flows from the mighty Himalayan mountains to the Indian plains. The Stock has to make a considerable effort only to remain still. To break even in the stock becomes difficult, if not impossible.
Contrast that with the case where you are buying a Fundamentally Strong Stock in an Industry with favorable macroeconomic and policy factors. Even a moderately strong Stock will do well in such an environment. Making profit becomes easier.
Studying the strength and weakness of the Industries also helps you rotate money in a timely fashion from one Industry’s Stocks to another. Investment funds use this Industry Rotation Analysis before putting their money in a Stock. And you may also handsomely benefit by using the same. Unambiguous, easy to use and actionable Industry Rotation Insight was not available to retail traders. However, now it is available in CUE Edge (real-time version) and CUE Industry Scorecard (web-based version). I use the insights from these Industry Analysts every time I invest in a Stocks.
Live application of Industry Acceleration/Deceleration.
Here is a live example based on my public Market Roundup webinar. The video recording is available on the YouTube Channel under Weekly Market Roundup category.
In the Market Roundup of Saturday 5th May 2018, I had shared that though Utilities Sector was the only positive performer for all the review periods looking back one week to one month, it was showing signs of weakness. The Utilities Industries were starting to decelerate.
Above is the snapshot that I had shared in the Market Roundup. You could find the deceleration from Industry Score Heat-Map in an instant using CUE Edge Real-Time Industry Analyst or using web-based CUE Industry Scorecard. You could observe the Industry Rotation not based on newspaper opinions or anecdotal evidence but based on real and meaningful data analytics. And the visual heat-map made the Industry Rotation obvious, hiding the complexity of the data under the hood.
How does Utilities Sector look today before Market Open on Thursday 10th May? Over a rolling five days period, Utilities Sector is now having the worst possible score of 1 and the visual heat-map color is dark magenta. I am attaching that snapshot as well.
Isn’t that fascinating? You could anticipate the Utility Industries’ decline before it happened. Just like looking at a decelerating car in a car race you can predict that the vehicle is about to fall behind. Sector/Industry Acceleration/Deceleration once again proved to be the best predictor of future market moves at the Sector/Industry level.
How you can benefit from Industry Rotation Analysis?
Industry and Sector Rotation takes place regularly. Sometiems it is strong. Other days it is muted. Whatever be the magnitude, you can know of the undercurrents instantly using CUE Systems visual Industry Rotation Scorecard and Heat-Map. And when you use that in your trading decisions, you have aligned forces from a critical layer of the market pyramid structure with your trade. Giving you trades that have a higher probability and lower risk.
How could you act on the signals from such Industry Analysis? For one, you could protect profit in your Utilities Stocks Long Positions using Trailing Stop. Or, you could book profit altogether, moving your money to another Industry that is now accelerating instead of decelerating.
Would you prefer not to do that? What is stopping you from using Industry Analysis in your next trade and all future trades? Afterall, it takes only a minute or two to gather that insight visually from CUE Tools.