Tuesday, November 7, 2017

From real-time industry rotation to profitable trades

From the desk of Sagar Nandi and Superior Profit.

Traders used to read about Sector and Industry Rotation in newspapers or subscribe to delayed information based on after the fact data. Not anymore. With CUE Edge, you may observe Sector and Industry Rotation happening in Real-Time in front of your eyes using Heat Map and Ranking Table.

Real-Time Sector & Industry Rotation at your fingertips

​You see Sector and Industry Rotation in Real-Time using Heat Map and Ranking Table. You may recognize the exact turning point of an Industry by seeing it change color from magenta to cyan (or vice versa). All done using Visual Analysis.

CUE Edge analyzes eleven Sectors and more than one hundred seventy Industries across twelve monthly review periods and more frequently for recent times across ten days, five days, two days and even one day (in Real-Time). It assigns Ranks for each of the analysis periods: 1 to the best performer and large number to the worst performer.

CUE Edge also applies a Heat-Map to the Ranking table that helps you visually, unambiguously and quickly identify which Sector or Industry is strong. Which one is weak. Which one is transitioning from strength to weakness and vice versa. Magenta represents weakness and cyan represents power.

The Pace Ranks at the right edge of the table indicates how fast a laggard is catching up (cyan color shows rapid strengthening ) or a leader is falling behind (magenta color suggests quick deterioration).

From this Ranking and Heat Map table you know where you may look for Long trades (i.e., in strong or strengthening Sector-Industry) and where you may look for Shorts (i.e., in weak or weakening Sector-Industry).

starting at the top: Sector analysis

​Which Sector was going up rapidly for a long time? Information Technology.

Is it weakening now? Yes.

Which Sector was weak earlier and is gaining strength? Energy.

You instantly and in Real-Time can answer these and many similar questions that can add extremely valuable edges to your trades.

Knowing the above facts, you would like to slow down on buying Technology Stocks. Probably book some profit or, at a minimum, use Protect Profit Stop.

For taking new Longs, you would look into Energy Sector, looking for potential Bottom Fishing Opportunities. However, you would like to do that in Fundamentally Strong Stocks. Isn't it? You can do precisely that by effortlessly drilling down from Energy Sector to its Industries to the Stocks and do a Peer Analysis to identify the most reliable Stocks.

Drilling down from sector to industry

Well, Energy as a Sector is going up.

Why don't we find the exact Industry in this Sector that is going to give you the best Long trades?

Just a click of the mouse. And you can view only the Energy Sector's Industries and identify the one best positioned for taking a Stock Buy Position.

Which Industry would that be? Oil & Gas Exploration and Production.

And all it takes is a glance at the drilled-down Industries and look for the cyan color over the five days period. Oil & Gas Exploration and Production Industry is having the best score of all Energy Industries. You may also visually identify the strength from the cyan color.

pinpoint the exact industry for best Long/Short trades

If you did not want to drill down from Sector, that is also perfectly alright.

After all, there are hundreds of Industries and all you might want is to identify which one is strong and look for Stocks to buy there. See which Industries are weak and look for Short opportunities in them.

You can of course do that in CUE Edge.

Using its Real-Time analytics, you see that Broadcasting had been weak for long and is still weak. Well, the best Short opportunities have passed. And the Long opportunities are not ready yet. You may keep an eye on the Industry to see if its starts to turn from magenta to cyan. That might give some Bottom Fishing opportunity.  Wait for that. That day will come when Broadcasting turns cyan. And CUE Edge will show that in Real-Time.

On the other hand, Construction Machinery & Heavy Trucks is an Industry that was strong before (cyan) and is becoming weak. It may be time to protect profit in any Long position in this Industry.

Do you take Short trades? Then it may be time to drill down to the Stocks in this Industry and look for the Fundamentally Weakest Stocks. You can do that in CUE Edge of course.

Drill down from industry to STRONG/WEAK stocks in secs

​Another mouse click. And in seconds you can identify the Fundamentally weakest Stocks in this weakening Industry.

The Vital Statistics tab calculates and puts together all the key and only the essential Fundamental parameters of the Stocks in an Industry. Vital provides Scores across multiple dimensions and applies consistent color coding to let you quickly carry out a Visual Peer Analysis and identify the strong and weak Stocks.

Magenta and Low Score Value is weak. Cyan and High Score Value is strong. It is that simple.

TEX (Terex Corp) is undoubtedly one of the weakest. It is overvalued, recognized instantly by magenta color and low Score in the Relative Valuation Score. It is having poor Growth relative to Peers - as is known from the magenta color across the EPS and Revenue Growth columns along with Low Scores.

It is also near 52 Week High. Would it not be nice to be able to Short the Stock at such high level?

At a minimum, looking at the Industry changing color from cyan to magenta and seeing this Stock Overvalued and having poor Growth, one would book profit or use Stop Order to protect profit.

There is more insight in this Vital tab. The shaded backdrop shows that Growth is in fact negative. And you get the prize for guessing it right. You can drill down to see the exact growth data - visually again.

Analyze key fundamentals using visual data

​Growth is one but not the only area of Fundamentals that you can drill down.

You can see Performance data and conduct Visual Peer Comparison across multiple periods from as long as one year to as recent as today.

You can see Stocks' Fundamental Valuation parameters and compare Stocks in the same Industry.

There are other insights also that you may get from CUE Edge.

For now, if we focus on the Growth of TEX, we see that its Growth is slowing down and has become negative in recent years. Not a time where you would like to add to already existing Long positions. You may start to consider booking profit. Or even look for Short?

truly highest probability long & Short term trades

There you have it.

You are now able to drill down from Sector to Industry. And then from Industry to Stocks and get a comprehensive insight from Fundamental Ranking and Peer Analysis of the Stocks.  Delivered by CUE Edge. Powered by the reliable data from Metastock Xenith (Thomson Reuters EIKON).

What is the result? You can catch the move in an Industry well ahead of others. Be it in the Long Direction or the Short Direction. Finding them just at the moment they start to turn up or down and then riding them until the trend reverses; that is the Industry rotation is complete.

Using this Unique yet, Easy to Use Visual Tool you are also able to decide in minutes if a Stock meets your standard for Long Term Holding. Or is it merely a Short-Term Play as a Swing Trade. You can see if a Stock is Overvalued or Undervalued. Is it having higher or lower Growth relative to peers? And much more.

For Swing Trading, you can take Longs only in strong Industries and in Fundamentally strong Stocks. And take Short Trades in weak Industries and Fundamentally weak Stocks.

Using this unique and multi-faceted CUE Edge, you can trade with a lot more confidence, knowing that Sector-Industry strength/weakness, as well as the Stock's Fundamental strength/weakness, are aligned with your trade.

Finally, of course, you would like only to Buy a Stock that is going up. And Short a Stock (including TEX) that is undoubtedly going down. For that, you may use CUE Charts Technical System and its unambiguous checklists to identify a trade setup at the right edge of the chart. You may refer to our Education Center for more information on that.

And if you are those who would rather watch a video than reading detail books, these Weekly Roundup Videos will show you CUE Edge and CUE Charts in action on Live Market.
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