April 29th, 2007

Buy High, Sell Higher: Insurance Industry Stocks

In a previous posting entitled “Stocks on the Move”, I described an approach involving stocks with volume spikes. Another approach for identifying stocks with prospectively good momentum (in addition to Industry Groups that appear to be moving up in rank and stocks experiencing volume spikes) is focusing on stocks that are forging into new all-time high territory.

I haven’t been able to come up with an scan that will go through the 7100+ stocks in my TC2007 database to automatically filter out those that are about to, or just recently have moved, into virgin new high territory. But what I have been doing is tagging stocks I’ve identify as “Stocks on the Move” and segregated them in an “A-List” watchlist. What I discovered, I believe, is interesting an actionable.,

There’s a clearly observable ceiling, or resistance trendline, on many stock charts at or near the all-time high price created with the end of the tech bubble. Many stocks have approached that price several times but were unable to break through. You probably now saying, “duh” …. a “so-what” fact.

But, actually, it’s amazing! After nearly seven years, many are, again, back at those levels and setting up for what, I believe, will be different this time around. With market momentum moving the leading averages to new highs (the DJ-30 already is in new all-time high territory and the S&P-500 is quickly approaching a similar breakthrough) it may mean that there are opportunities setting up for many lower risk trading opportunities with big quick, upside potential.

A great example of what could happen to these stocks is Brush Engineered (BW). True, it’s in a very hot Industry Group right now (Metals-Processing and Fabrication), but it shot through a long-term resistance level and continued moving up like a rocket:

Another great example to prove the point is SUN which, in addition to breaking through to all-time new highs, but is an Oil & Gas stock, one of the best sectors in the last decade:

The stocks I’m about to list are in many industry groups but they share one common characteristic …. all are approaching or have recently moved through a clear, very long-term resistance level that stretches back nearly a decade to around the time of the end of the 90’s bull market.

Although many have had significant recoveries from their 5-year lows (100% and more), breaking into new highs will give them new, unobstructed upside momentum. What are some of those stocks and what do their charts look like? Since there are many (my list currently includes over 100 stocks), I’ll cover them over several postings. First are the insurance stocks (click on symbol for a chart):

  • AOC -Insurance Brokers
  • LPHI-Insurance Brokers
  • GFR -Life
  • NFS -Life
  • PL -Life
  • PNX -Life
  • AGII -Prop/Casualty/Title
  • CINF -Prop/Casualty/Title
  • FFH -Prop/Casualty/Title
  • MCY -Prop/Casualty/Title
  • MTG -Prop/Casualty/Title
  • TRH -Prop/Casualty/Title

A word of caution though. None of the Insurance Groups ranks higher than 110 and have, in fact, dropped in ranking over the past several weeks. Their ranking will begin to improve and the stocks will actually begin to breakthrough the resistance trendlines once the stocks begin to be accummulated by big institutional money money flows.

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