The Traders Journal

Charts I'm Stalking: Action Practice #6

 | 

Yes, I’ve profited handsomely for years by trading on the coattails of top  mutual funds when they report their new holdings each quarter.  Yes, this is precisely why so many of you download the Tensile Trading ChartPack each quarter because we make it super easy for you to coattail along as well.

https://store.stockcharts.com/collections/stockcharts-com-chartpacks/products/tensile-trading-chartpack-by-gatis-roze

No, you don’t make these profits without some independent thinking, research and comparisons on your part.  

Okay, so we know that due to legislative changes as explained in the Action Practice #5 blog, Fidelity is selling their positions in certain financial equities and replacing them with different financial equities, such as ICE, CME, SPGI and STT.


http://stockcharts.com/articles/journal/2016/10/charts-im-stalking-action-practice-5.html

So let’s dig and investigate why Fidelity finds these stocks so attractive.

  1. The first observation is that all four of our candidates have what Morningstar calls ‘wide-moats’,  This means these companies all have unique sustainable competitive advantages that make it difficult for rivals to wear down their profits and market share.
  2. The second observation is that despite SPGI being classified as a Consumer Discretionary Sector stock, I submit that it should actually be listed under the Financial Sector along with ICE, STT and CME.  Having said that, this Financial Sector is clearly the most attractive of all the sectors this past month for a whole host of reasons.
  3. Performance-wise as well (put all four stocks on a PerfChart wth VTI), you see that all four have outperformed the market by a significant amount.  My point being that the markets operate on the law of groupings, and stocks — like people — are judged by the company they keep.  Pick your friends (and stocks) accordingly.  Another sister stock in this grouping that you might want to look at is BATS.
  4. When we dig into the earnings and fundamentals, you see that SPGI and ICE stack up ahead of STT and CME.  I’m an IBD subscriber so I like to use their Stock Checkup feature on investors.com.  For example, check out the Return on Equity and the Return on Assets for SPGI.  Don’t forget to investigate the research tools available to you through your brokerage websites.  One of my brokers has a sensational “plug and compare” matrix that allows me to align all four candidates side-by-side for clear comparisons.
  5. I’m impressed with these companies because all four have what I perceive to be reliable revenue streams and good growth possibilities.  There’s a lot to like here.
  6. An analysis of the Point & Figure Charts leave me cold on STT and less interested in ICE.  However, CME and SPGI project a nice upside count with no previous overhead supply to work through, and this increases the positive probabilities.
  7. Having said that, if I had to pick one equity from these four, I’d put my money on SPGI (S&P Global Inc.) for all the reasons I’ve just outlined.

This week’s four Action Practice candidates are an interesting group indeed.  Please dig into these charts and I’ll be back at you in two weeks with my analysis.

Trade well; trade with discipline!
- Gatis Roze, MBA, CMT

 

Enjoy this article? Hear more from Gatis Roze at

August 10th & 11th, 2018


See how the experts are protecting themselves from market volatility and reducing risk in uncharted waters

Join us online this August for two full days of investing insights, charting wisdom and market commentary from the industry's leading technicians. Streaming live wherever you are, you'll learn exactly how the experts are navigating the market's changing tides and remaining profitable in all conditions.

Gatis Roze
About the authors: , CMT, holds an MBA from the Stanford Graduate School of Business and is a past president of the Technical Securities Analysts Association (TSAA). He is also the co-author of Tensile Trading: The 10 Essential Stages of Stock Market Mastery (Wiley, 2016). A full-time investor for over 25 years, Gatis has taught sold-out investment courses throughout the Pacific Northwest and beyond since 2000. Learn More

Grayson Roze
is the author of Trading for Dummies (Wiley, 2017) and Tensile Trading: The 10 Essential Stages of Stock Market Mastery (Wiley, 2016). He has worked in the financial services industry for StockCharts.com since 2012, and now serves as the Business Manager for the company. He holds a Bachelor's degree from Swarthmore College. Learn More
Subscribe to The Traders Journal to be notified whenever a new post is added to this blog!

Table of Contents

comments powered by Disqus