by Michael Clark
When I first started investing, Investor’s Business Daily was a wonderful resource. I especially like their Relative Strength Index. Stocks with a RS above 95 were sure winners (I thought). When I began creating market indicators I sought to develop my own Relative Strength Indicator. I have been trying to improve this indicator for decades now.
Here is a list of the Top 25 and Bottom 25 issues in our database. Our RS indicator is a modified version of our CGTS Resistance System. This says Autozone (NYSE:AZO) is the best stock in our CGTS Universe. Hard to argue with this. The worst stock? Sandridge Energy.
Note in the report below for issues in the Top 25 that are down-trending. A stock that is in the Top 25 while in a correction should be recognized for its strength. One can note a downtrend by either or both the PROP1 column (below -7) and/or the Intermediate Trend column (-1). We will look at some charts of these issues below.
One of the stocks we have been wanting to buy is in this group of Top 25 stocks, in a current downtrend: HMY, Harmony Gold Corp. There are others.
In the Bottom 25 we see a lot of recognizable names, including VIX, Inverse ETFs, copper, coffee. Don’t believe people who claim the global economy is recovering because oil and gold stocks are in rally mode. This is coming after more than a year of active selling — these issues are in a reflex market recovery. But the global market is still contracting. Watch copper, and weep.
One issue in the Bottom 25 deserves note. The very volatile 3x ETFs are outliers here, in that they move quite rapidly back and forth. Note: JNUG, Junior Miners Gold Bullish ETF 3x. It is currently in the Bottom 25 (-.417); two weeks ago its relative strength was +.517. This is the same story for NUGT.
A method: we are going to watch the Top 25 and the Bottom 25 with the understanding that the Top 25 are issues to buy and the Bottom 25 are issues to short. When Top 25 issues, in a PROP1 SELLZONE decline, pop back up into the BUYZONE, they become natural buys. None of the Bottom 25 issues are in the PROP1 BUYZONE. A few issues are Intermediate-Trend Positive: JO, ENDP, RUSS (Short Russian Stocks ETF). These issues, unless they can break into the PROP1 BUYZONE, are shortsale candidates. They are rallying, weak rallies, which will be destined to peter-out and turn back down. Even Bottom 25 issues that break into the PROP1 BUYZONE are not out of the woods. These can very easily return to the shortsell grid, after a failed attempt to rally.
|CGTS RELATIVE STRENGTH|
|TOP 25||CLOSE||CGTS REL S||INT TREND||PROP 1||COMPANY|
|3||UNH||134||0.866||1||5||United Healthcare Daily|
|4||SPG||197.77||0.855||1||3||Simon Property Group|
|6||AFG||73.25||0.804||1||5||American Financial Group|
|12||NOC||214.42||0.767||1||-1||Northrup Grumman *|
|15||QQQ||110.109||0.758||1||3||Powershares Nasdaq $|
|18||CDE||7.28||0.751||-1||-5||Coeur D’Alene Daily|
|19||AG||10.35||0.747||-1||-3||First Majestic Silver|
|20||FRT||153.6||0.742||1||-7||Federal Realty Trust|
|25||PKW||46.29||0.723||1||3||BUYBACK ACHIEVERS ETF|
|BOTTOM 25||CLOSE||CGTS REL S||INT TREND||COMPANY|
|24||NUGT||70.87||-0.359||-1||-25||* Gold Miners Stocks Bullish ETF 3x (NYSE:O)|
|22||DBB||12.54||-0.407||1||-19||Base Metals ETF|
|21||JNUG||99.12||-0.417||-1||-25||* Junior Gold Miners Bullish ETF 3x|
|20||FRO||8.02||-0.453||-1||-15||Frontline Limited Shipping|
|19||SPU||1.73||-0.578||-1||-25||SkyFruit Juice China|
|18||^VIX||13.07||-0.682||-1||-23||CRB Volatility Index Daily|
|17||JJM||19.474||-0.687||1||-15||Industrial Metals ETN|
|15||TNK||3.49||-0.721||-1||-25||Teekay Tankers Ltd.|
|12||DWTI||71.96||-0.754||-1||-19||* Crude Oil Bearish ETF 3x (NO)|
|11||WDRW||28.01||-0.823||-1||-21||* Regions Banks Bearish ETF 3x (NO)|
|10||MYY||14.92||-0.961||-1||-23||Short Midcap Index Short|
|9||SBB||48.405||-1.099||-1||-21||Short Small Cap 600 S&P ETF Daily|
|7||QLTI||1.49||-1.362||-1||-17||QLT Inc (Biotech)|
|6||RUSS||15.48||-1.401||1||-25||* Russian Stocks Bearish ETF 3x|
|5||SH||19.93||-2.596||-1||-23||Short SP 500 ETF|
|4||PSQ||51.97||-2.712||-1||-23||Short QQQ Index ETF|
|2||SZK||19.68||-3.524||-1||-25||Short Consumer Goods|
Here are some stocks to watch from the Top 25: we especially like HMY and SNA, Snap-On Inc in this group.
Here are a couple to watch from the Bottom 25, NUGT to trade when it moves back into the PROP1 BUYZONE — others, perhaps, to re-short.
This is the “worst stock” in our database at the moment.
Hope you find this interesting. We plan to turn this into a major feature of our newsletter.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.