Complete Top Down Analysis in Real-Time to find the Strongest Stocks.
In the recent weeks, the USA Market had displayed down-up-down or flip-flop movement. We discussed this in depth in the Live Market Roundup of Saturday 7th March 2018. In such a Market situation, it is crucial to adopt an approach that identifies the best Stocks before Buying. What is a best Stock? It is a Stock that has everything going for it.
Step by step Top Down Analysis where at every level we try to identify strength, and Buy the Stock only if there is strength in every level or most of the levels; provides such a careful approach. Here is how I carried out the Top-Down Analysis today, Monday 9th April 2018 in Real-Time usign CUE Systems.
At the Sector Level, using CUE Edge, I noticed that Health Care as a Sector is lagging behind others. In the CUE Edge Sector Scorecard and Heatmap table, magenta color and a lower score indicate that a Sector is lagging. From the heat-map, it is immediately evident that Health Care is one of the weakest Sectors across all the review periods between 1 Day period to 12 months period.
A Sector is too broad for identifying Industry Rotation. Sector move study may not allow us to catch the Fundamentally Strong Stocks just as they resume their up move. For that, we need to drill down to Industry level. CUE Edge allows to drill down from Sector to underlying Industries using a single click. I did precisely that. Here is the resulting CUE Edge Industry Scorecard and Heat-Map for Health Care Industries.
What do we see here? In general, the Industries are all weak; we know that from the overall magenta color of the cells in this table. However, there is another critical piece of information that allows us to identify hidden undercurrents well ahead of others. That is the Acceleration that shows up on the Pace Columns at the right. Multiple Health Care Industries have the Pace 1 Day Scores in cyan color. These cyan Pace Scores indicate that though the Industries were behind others, they are starting to sprint. Pharmaceuticals is one such Industry. It jumped and gained Score from 14 over 2 Days to 166 over 1 Day, i.e., today. That is a big jump. And the Pace 1 Day column flashed that Acceleration using the cyan Heat Map color.
Stock Fundamental Analysis
If Pharmaceuticals Industry is Accelerating, it is logical to drill down into its Stocks and see if we find a Fundamentally Strong Stock. We can do that using CUE Edge with the click of the mouse. Here is the Vital Statistics of Pharmaceutical Stocks as found by CUE Edge; all calculations are done in Real-Time using reliable data from Metastock Xenith (Thomson Reuters EIKON).
Immediately the Stock Merck (MRK.N or MRK) comes to the notice. It is Optimally Valued; indicated by cyan color on Relative Valuation column. Quarterly Earnings Growth is gradually going up in recent quarters. Pays an excellent Dividend Yield of 3.6% and today it went up by about 6% as of the time of this post. So far, MRK looks strong based on Industry Acceleration and Stock Fundamentals.
Lastly, we would like to check out the CUE Technical Charts to ensure that there indeed is a Buy opportunity on the chart; that is there is a Low-Risk Buy Point. The series of CUE Technical Charts below confirmed that such an opportunity might be approaching.
1) MRK Weekly Backdrop Chart shows that Candle color changed from magenta (Bearish) to cyan (Bullish) and the Stock reversed from Watermark Support Level (dotted lines near price base).
2) In CUE Daily chart, MRK broke out of Memory Resistance (Smart-Auto red color Downtrend Line) after creating a long base at Watermark Level (dotted line below recent price lows). Today’s Activity is high as shown by today’s Activity bar at the bottom.
Trading with Confidence
What is the result of these few clicks on CUE Edge and then looking up the charts on CUE Charts? You could find a Stock that is Fundamentally Strong. The Stock is in an Industry that is Accelerating after being down for a long time. And the Stock broke out of resistance today with massive percentage move and with heavy volume.
Traders have higher confidence in Buying such a Stock where everything is going for it: Industry strength, Fundamental strength, and Technical strength (moving out of the base and breaking out of resistance), sizable percentage move with high volume. Instead of buying a Stock based on only a Fundamental Trading System or a Technical Trading System.
And if you want to Short Stocks or take Bearish trades using Options etc., you can carry out the exact opposite analysis. Start with a weak Industry. Drill down to find Fundamentally Weak Stocks and then looks for Low-Risk Short Point.
Either way, you have the confidence that you have done your homework before placing your next trade and that you have a real edge over many other traders using this Complete Top-Down Analysis.