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Message  yfournier Mer 4 Juin - 16:07

Top Down Analysis With ETFs
Stockscores.com Perspectives for the week ending May 30, 2008


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In this week's issue:
Weekly Commentary
Strategy of the Week
Stocks That Meet The Featured Strategy


A strong stock in a strong sector will almost always do better than a strong stock in a weak sector. That means it is very important to assess whether money is coming in to a stock's industry group or leaving it. Over the long term, you will make more money by focusing on good stocks that are in sectors that are leading the market.

This means that a top down approach to the market will help us pick better stocks. Each week, spend a few minutes assessing the charts of the sectors to focus your attention on those groups that look good. Applying the same chart reading skills that you apply to stocks will help to improve your overall performance in the market.

For example, in the first week of April I noticed that the Canadian Energy ETF (T.XEG) was breaking out through long term resistance. I wrote then that it was a good time to consider Energy stocks and made a number of Energy stock features in my newsletters. They have all done well.

The ETF (Exchange Traded Fund) is the best way to analyze the sector groups. I like them because they trade like stocks, making it easy to analyze their charts using Stockscores.

I suggest everyone do the following. Using the Stockscores Watch List Creator, build watch lists with the ETF groupings below. On a weekly basis, check the charts of those groups to see which sectors have good long term chart patterns. Be sure to look at 2 year charts when you do this, you want to find the beginnings of major trends and not minor moves.

I built the list below from the resources at the American Stock Exchange website, www.amex.com. There are over 500 ETFs trading on the AMEX, I focused on those that are the most liquid when creating this lis.

You can do the same for the Canadian markets by going to the TSX website, www.tsx.com.

Index ETFs
These consider broad market indexes and are useful for fining the areas of general strength or weakness in the overall stock market.
SPY - S&P 500
DIA - Dow 30
QQQQ - Nasdaq 100
IWM - Russell 2000

Short ETFs
An easy way to take advantage of markets that are likely to move lower, these ETFs go up when their underlying market does down, allowing the investor to buy something that improves in value during times of market weakness.
QID - Nasdaq 100 Short
DXD - Dow 30 Short
SDS - S&P 500 Short
DUG - Oil and Gas Short
SKF - Financials Short
SRS - Real Estate Short

Industry ETFs
Based on sectors of the market, you can buy the ETF to take advantage of developing trends in that sector or just use the ETF for analysis of that sector.
XLE - Energy
UYG - Financial
USO - Oil
GLD - Gold
XLB - Materials
XLI - Industrials
XLU - Utilities
XHB - Homebuilders
XLY - Consumer Discretionary
XLK - Technology
TLT - 20 Year Treasury Bonds
XLP - Consumer Staples
UNG - Natural Gas
DBA - Agriculture
XRT - Retail
XME - Metals and Mining
XLV - Health Care
IYT - Transportation
SLV - Silver
IAI - US Broker Dealers
IYZ - Telecom

Country ETFs
Country ETFs are an easy way to trade a basket of stocks from a specific country
EWZ - Brazil
EEM - Merging Markets
EWW - Mexico
EWT - Taiwan
EWJ - Japan
FXI - China
EWM - Malaysia
EWS - Singapore
EWY - South Korea
EWH - Hong Kong
RSX - Russia
EWA - Australia
ILF - Latin America
EWC - Canada
EWG - Germany
EWL - Switzerland

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This week, I used the Stockscores Market Scan tool to search for stocks that were trading with abnormal price gain and volume action on Friday. I inspected the charts that were found for good chart patterns. When looking at the charts, I want to see stocks breaking from sideways trading ranges in the early stage of an upward trend. The trade set up needs to have a good trade off of risk for reward potential. Here are some charts that I like:
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1. FIRE
FIRE is breaking from a rising bottom consolidation. The company rejected an offer to purchase their shares for $7.50 a share, since the stock closed at $7.64 the market seems to be speculating that there may be more action on a buy out action. This may be a catalyst to turn around the stock's long term downward trend. Support at $6.55.

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2. LPHI
LPHI showed strong volume Friday as it broke to the upside from a rising bottom consolidation. Support at $17, the stock should be able to rise to $35 giving it a decent risk reward trade off. We may see a pull back before it works its way higher.

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References

Get the Stockscore on any of over 20,000 North American stocks.

Background on the theories used by Stockscores.

Strategies that can help you find new opportunities.

Scan the market using extensive filter criteria.

Build a portfolio of stocks and view a slide show of their charts.

See which sectors are leading the market, and their components.

Disclaimer
This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don't consider buying or selling any stock without conducting your own due diligence.
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yfournier

Messages : 13
Date d'inscription : 27/12/2007

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