Since Marc Chaikin's weekly note is proprietary to subscribers only, we generally avoid sharing it here. However, the section on Neutral + Rated Stocks from his August 19th note was something we thought we should pass on because it helps us optimize the Chaikin strategy in fundamentally solid bull markets where institutional sector rotation is the main driver of price fluctuations:
Neutral + Rated Stocks
We preach the discipline of combining fundamentals with technicals as the path to consistent profits for both traders and investors. This means focusing your buying on stocks with Bullish Chaikin Power Gauge ratings that are outperforming the market with strong Chaikin Money Flow. When all three line up the odds favor positive investment returns.
When a stock with bullish potential based on the 20 factors in the Chaikin Power Gauge rating drops below our smoothed long term trendline, the computer moves the Power Gauge rating down to Neutral + from bullish. The logic of this is apparent to anyone who has been an aggressive buyer of fundamentally strong stocks in a bear market…pain and suffering.
However, in a market like we are in today, with corporate earnings strong, interest rates low and the uptrend in stock prices firmly intact, we do experience sector rotation. As investors take profits in sectors and groups that have performed well over the past 3-6 months, stocks with strong fundamentals, like the Financials in May and June and the Energy stocks in July and August often see their Power Gauge ratings drop to Neutral +.
These stocks are often ripe for buying and our stock screener can help you find them. That would appear to be the case regarding Oil Refining and Retailing stocks like Marathon Petroleum (MPC), Phillips 66 (PSX) and Valero Energy (VLO). Look to buy stocks like these when they get oversold and Chaikin Money Flow begins to improve, indicating that institutional selling pressure may be over.
Neutral + Rated Stocks
We preach the discipline of combining fundamentals with technicals as the path to consistent profits for both traders and investors. This means focusing your buying on stocks with Bullish Chaikin Power Gauge ratings that are outperforming the market with strong Chaikin Money Flow. When all three line up the odds favor positive investment returns.
When a stock with bullish potential based on the 20 factors in the Chaikin Power Gauge rating drops below our smoothed long term trendline, the computer moves the Power Gauge rating down to Neutral + from bullish. The logic of this is apparent to anyone who has been an aggressive buyer of fundamentally strong stocks in a bear market…pain and suffering.
However, in a market like we are in today, with corporate earnings strong, interest rates low and the uptrend in stock prices firmly intact, we do experience sector rotation. As investors take profits in sectors and groups that have performed well over the past 3-6 months, stocks with strong fundamentals, like the Financials in May and June and the Energy stocks in July and August often see their Power Gauge ratings drop to Neutral +.
These stocks are often ripe for buying and our stock screener can help you find them. That would appear to be the case regarding Oil Refining and Retailing stocks like Marathon Petroleum (MPC), Phillips 66 (PSX) and Valero Energy (VLO). Look to buy stocks like these when they get oversold and Chaikin Money Flow begins to improve, indicating that institutional selling pressure may be over.
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