September 7th, 2008

Industry Groups on the Move: Tech Still But Few Compelling Charts

Sometimes, a stock selection tool just doesn’t seem to work. This time it’s the IBD Industry Groups on the Move (in the interest of full disclosure, this is a scan I “invented” and is not endorsed or designed by IBD). I first described how I use weekly changes in IBD’s Industry Group rankings to highlight Groups that may contain future top stocks in February 2007 but since then it frequently led me to jump on to stocks in select industries too early.

The following table summarizes recent postings derived from scanning the Groups on the Move:

All in all, it’s not too bad average. The Industry Groups have declined an average 1.29% from the date of the blog posting to Friday while the S&P has declined 8.50% over the comparable periods. With the exception of the most recent Technology Group scan or August 10, each of the scan results were better (or not as bad) as the S&P 500 over the same period.

But as this Bear Market wears on, the Groups on the Move seem to be churning and not spilling out any stocks with compelling (meaning ready to be bought) charts. There are a number of stocks whose charts have great potential but there are still base building and won’t be ready for significant upside moves for several weeks or months. And they may be base building only because they’ve fallen so far that falling any further would be equivalent to hanging up a “going out of business” sign. For these, waiting is still more prudent than trying to jump on board and catch the first few percentages.

The Industry Groups increasing most in ranking since April 25 are still tech-related. I still can’t find many stocks that look like they’re about to make significant breakouts as I scroll through the charts of these Groups. The few exceptions include:

  • QSII (Quality Systems): Computer Sftwr-Medical
  • ATHN (Athenahealth): Computer Sftwr-Medical
  • HLTH (Hlth Corp): Computer Sftwr-Medical
  • MDAS (Medassets): Computer Sftwr-Medical
  • ELON (Echelon Corp): Computer-Networking
  • AOC (Aon Corp): Insurance-Brokers
  • MMC (Marsh & McLennan): Insurance-Brokers
  • LPHI (Life Partner Holdings): Insurance-Brokers
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