Edition

IFTA JOURNAL
2017 EDITION
Table 9. Results of Skyworks Average Gain/Trade
Skyworks Bear Market Bull Market
Average Loss $(0.23) $(0.68)
Average Gain $0.66 $6.64
The SCTR for the S&P 500 ETF (SPY)
For reference, as part of the results section, I have shown the
SPY ETF with an SCTR ranking against other ETFs. While the
$SPX has enjoyed a tremendous move down and up over the
past eight years, the SCTR shows that it performs adequately
but subpar to the moves investors could have achieved using the
SCTR to point them to the most strength. (Figure 7)
Figure 7. SCTR Plotted as an Indicator on S&P 500 ETF (SPY)
The Results section has demonstrated the use of the indicator
on different stocks from well-known major firms to unique
product companies. The SPY ETF chart hovers around the 50 to
70 level on the SCTR. It never really can outperform on a longterm
basis.
Discussion
Characteristics of Price Movements With High
SCTR Rankings
The stocks presented here have had strong price action, which
is what a high SCTR represents. Weak price action stocks don’t
come to the forefront. The four stocks presented compelling
cases that you could use the SCTR rankings to work through
the bear market if you wanted to stay invested. Seeing the
SCTR plotted on long charts through bull and bear markets
demonstrates how important it is to rotate in and out of major
growth stocks. They can be weak for years after going on a
strong run. Using the SCTR to search out new investing ideas
can be an exciting catalyst for a portfolio. The SCTR works on
ETFs as well. Sector rotation occurs very clearly on the changing
leadership with the SCTR on ETFs. By choosing from different
SCTR groups, this can also help an investor partition into large
cap, small cap, or ETFs with ease.
Reviewing the charts above with Hasbro, the stock had a nice
trading percentage with lots of small losses but demonstrates
the ability to ride the trend once it starts working. With only 46
trades in eight years, and only 10 of those trades longer than a
week, this company might not stay on your radar. If you know of
a catalyst like Star Wars or Christmas, watching for the SCTR to
break out can really help your timing. Once the stock starts to
surge in momentum, other buyers will be drawn in as well.
Group Powerful Stocks Together. Having a list of highmomentum
stocks in an industry group can be very powerful.
The SCTR is one way to watch these stocks move higher or start
to weaken. Keeping a list of the top 100 SCTR stocks helps to
stay focused on only the best.
Watch for the End of a Big Run. Apple had given SCTR buy
signals for over 70% of this bull market. The SCTR made its high
around January, over six months ago, and looks to be weak. An
understanding of Apple, Inc. currently having an SCTR ranking
in the low 30% level is enlightening. With a strong earnings
report, the company could jump back up to become a top
performer, but until it does, you can wait. Much like Blackberry
or Microsoft, it is hard to know when the company is going to
put in its final high. Trading into and out of the stock on strength
in the SCTR makes sure you don’t end up being the last holder.
Having a method of taking profits and not getting caught up in
the story is very helpful. When Apple pulled back in 2012, the
SCTR fell to a low 10% on the SCTR ranking.
One of the difficult concepts for investors to grasp is the
importance of selling winners near the highs. As most of the
companies find a sweet spot for a few years and make a major
run, investors are usually still holding the stock long after the
trend is over. In Apple’s case, the run has been going on for 15
years. One day a pull back will mark the major long-term top.
The SCTR helps force an exit of all or some of a position. Because
Apple tends to trend and then break down, waiting for a weekly
signal can help, which is different than Amazon.
While the success of capturing the majority of any price
movement is a variable, many different systems used by other
traders to visualize where money is flowing is a part of the
answer for capturing strong trends. The SCTR graphically
illustrates when the stock is finding a resurgence of interest.
While we do not know how long a trend will last, the ability to
graphically see the stock gaining or losing the characteristics of a
top performer makes it easy to educate new investors. Teaching
the simple methodology of looking for stocks in the top 25%
seems to work quite well. When you find a few stocks at the same
time that are trending, it can be an accelerator for your portfolio.
The SCTR Can Help Trade Seasonality
Amazon is world renowned, and recently they have started
to focus a little more on the investor bottom line. This stock
seems to surge annually, and the SCTR knowledge of when
the outperformance is happening is the powerful point in the
ownership of the stock. Seeing a change in relative strength is
helpful, but seeing an actual ranking for the stock is compelling.
The SCTR is a live indicator that can tell you what percentage of
stocks this is currently outperforming. Although Amazon has
only had 20 times where the trend has lasted more than a week,
catching these on the first breakout rather than waiting a week
for those trades led to 40% more profit.
The ability to be pushed out of a seasonal stock is very valuable,
and sometimes the wavy price action covers up how well the
stock is doing compared to all the other stocks in the market.
IFTA.ORG PAGE 65