On the apparently fantastic news of enormous capital infusion into Public Sector Banks, on 25th Oct 2017, Indian Banks surged. The Indian government had just announced USD 32.4 Billion recapitalization plan for the banks.
Investors and rating agencies were competing with each other about how great it was for the Indian Banking Industry. Moody's said, "INDIA'S CAPITAL INFUSION PLAN IS A SIGNIFICANT CREDIT POSITIVE FOR INDIAN PUBLIC SECTOR BANKS". Breakingviews published an article with the headline "Investors embrace Indian bank recap on any terms". All the news channels were subtly telling retail traders to Buy the Stocks. Banks surged.
Who was buying on the news? Many retail traders for certainty. However, not CUE 360° traders. CUE traders don't like to chase a Market. And they would rather trust the data than to Buy on the news or others' opinion of how great this was for the Banking Stocks in India.
Some of my friends, who are not able to get rid of their dependence on other analysts and news channel's view on a Stock, sometimes say something like this "That news worked this time." Or "That free Stock Tip from the brokerage/analyst on the web gave me profit". I tend to point out that is not impossible.
When some retail traders chase the news, it is likely they are Buying at the Ask. And that in itself propels price higher. Those who are lucky to buy before others have profit. Those poor souls who Buy late end up being the losers. And I always ask them - why would you chase a Stock? Would you do that when buying anything else? Or you would wait patiently for the price to come to reasonable valuation?
They tend to agree at an intellectual level that it is better to wait for optimal Valuation. However, putting that in practice is another thing. A little bit of help from a Robust System with the backing of Reliable Data is needed for the confidence to make own decisions.
Let’s come back to the Indian Public Sector Banks. We will review several of them using CUE Charts first.
Allahabad Bank (ALBK.NS) jumped up on the recapitalization news on 25th Oct. Where is it today? Almost back to where it started. After the initial “chasing” driven move up, it only fell. There was no rally whatsoever.
Oriental Bank Of Commerce (ORBC.NS) shows the same picture.
Andhra Bank (ADBK.NS)? Same again.
Even the largest Public Sector Bank, State Bank of India (SBI.NS) could not go up any further after the initial two days “chasing” fed rally.
CUE Traders, instead of taking Long based on news, might have followed what the Chart Signals were telling. And what CUE Charts pointed to was to keep away from Buy. What is more? There were several Swing Short Trade Setups in several of these banks, like the ones marked on Allahabad Bank Hop On Daily Chart below.
After the "chasing" driven rally, Allahabad Bank did not go up at all. Instead, it declined and declined severely. The people who bought after the news are probably still holding, saying "in the Long-Term" the Stock will go up. Meanwhile, they are stuck with a hugely losing trade and with capital locked in that.
Bearish Headwind (red diamond) could successfully predict the impending reversal and caught the very top.
The magenta color Candle marked on the chart that occurred in the Stock’s down-trend represented Optimal Swing Short opportunities. All those trades were profitable Short opportunities. And could be decided using CUE Unambiguous Checklists exactly when the magenta Candles appeared. There were three such Shorting opportunities.
As the Stock is continuing to fall as of 16th January (today), partial Short Position may still be held to let profit run. The trades could be made entirely Risk-Free by booking partial profit by now and using CUE Protection to apply Protect Profit Stop.
Similar Short Opportunities were probably there in other Public Sector Banks as well. So much for the herd mentality and following the lofty pronouncements of the rating agencies and analysts.
Now, could the Stocks go up? The certainly could. And that would have also shown up on the same CUE Charts, and we could Buy if there were Optimal Buy Points. But there were not any. Not on CUE Technical Charts.
What about the Stock’s Fundamentals? Here you could use CUE Vital. CUE Vial allows Fundamental and Peer Analysis of Global Stocks. Including India Stocks (India is within our globe!). What does the Fundamental Scorecard says about the banks that I have mentioned on this blog? Here is the snapshot of CUE Vital's tool's Vital Statics pane.
All the Stocks are Overvalued. The magenta color on Valuation Scores instantly shows that the Stocks are Overvalued even now. When the prices shoot up after the capitalization, they were probably worse off. Overvaluation was another warning sign for CUE 360° Traders to avoid Buying the Stocks.
What was the result of the Bank Stocks over last two months? In CUE Edge I drilled down to identify the Stocks in Banking Industry and looked at the Performance pane, as shown below.
Over last two months, ten Banks declined by more than 10%, substantial declines. How many were Public Sector Banks? Almost all of them!
India’s Banking Index Bank Nifty has under performed the Broad Market since November 2017. You could check that out instantly from the Relative Performance Indicator on CUE Charts. Overall, however, Bank Nifty did not decline much. Neither did it go up? How was that possible? That happened because, on aggregate, Non-Public Sector Banks made up for the loss of the Public Sector Banks. You could figure that out instantly from CUE Systems.
Isn’t it like a trick? Recapitalization of Public Sector Banks was supposed to lift those Stocks and sustain their rally. It did not. Instead, Private Sector Banks did better. And all that while, news media was telling you to buy Public Sector Banks, often, subtly. Through their positive coverage of the recapitalization.
CUE Traders knew better than to fall for such tricks. Instead, they used 360° Analysis to see what was going on and saved their account. They did not see any CUE Long Trade Setup on charts. They saw Short Trade Setups. And Fundamentally, they saw the Stocks were Overvalued. Not a good time to Buy.
There are many such examples where following your analysis based on Reliable Data and Robust Analytics and Charts; you could be much better off than following so-called pundit’s views.
Similar 360° Analysis of the USA and India market are regularly shared through the CUE Sight 360° Mobile App and Forum. You might check that App out for yourself on this page.
Traders used to read about Sector and Industry Rotation in newspapers or subscribe to delayed information based on after the fact data. Not anymore. With CUE Edge, you may observe Sector and Industry Rotation happening in Real-Time in front of your eyes using Heat Map and Ranking Table.
Real-Time Sector & Industry Rotation at your fingertips
You see Sector and Industry Rotation in Real-Time using Heat Map and Ranking Table. You may recognize the exact turning point of an Industry by seeing it change color from magenta to cyan (or vice versa). All done using Visual Analysis.
CUE Edge analyzes eleven Sectors and more than one hundred seventy Industries across twelve monthly review periods and more frequently for recent times across ten days, five days, two days and even one day (in Real-Time). It assigns Ranks for each of the analysis periods: 1 to the best performer and large number to the worst performer.
CUE Edge also applies a Heat-Map to the Ranking table that helps you visually, unambiguously and quickly identify which Sector or Industry is strong. Which one is weak. Which one is transitioning from strength to weakness and vice versa. Magenta represents weakness and cyan represents power.
The Pace Ranks at the right edge of the table indicates how fast a laggard is catching up (cyan color shows rapid strengthening ) or a leader is falling behind (magenta color suggests quick deterioration).
From this Ranking and Heat Map table you know where you may look for Long trades (i.e., in strong or strengthening Sector-Industry) and where you may look for Shorts (i.e., in weak or weakening Sector-Industry).
starting at the top: Sector analysis
Which Sector was going up rapidly for a long time? Information Technology.
Is it weakening now? Yes.
Which Sector was weak earlier and is gaining strength? Energy.
You instantly and in Real-Time can answer these and many similar questions that can add extremely valuable edges to your trades.
Knowing the above facts, you would like to slow down on buying Technology Stocks. Probably book some profit or, at a minimum, use Protect Profit Stop.
For taking new Longs, you would look into Energy Sector, looking for potential Bottom Fishing Opportunities. However, you would like to do that in Fundamentally Strong Stocks. Isn't it? You can do precisely that by effortlessly drilling down from Energy Sector to its Industries to the Stocks and do a Peer Analysis to identify the most reliable Stocks.
Drilling down from sector to industry
Well, Energy as a Sector is going up.
Why don't we find the exact Industry in this Sector that is going to give you the best Long trades?
Just a click of the mouse. And you can view only the Energy Sector's Industries and identify the one best positioned for taking a Stock Buy Position.
Which Industry would that be? Oil & Gas Exploration and Production.
And all it takes is a glance at the drilled-down Industries and look for the cyan color over the five days period. Oil & Gas Exploration and Production Industry is having the best score of all Energy Industries. You may also visually identify the strength from the cyan color.
pinpoint the exact industry for best Long/Short trades
If you did not want to drill down from Sector, that is also perfectly alright.
After all, there are hundreds of Industries and all you might want is to identify which one is strong and look for Stocks to buy there. See which Industries are weak and look for Short opportunities in them.
You can of course do that in CUE Edge.
Using its Real-Time analytics, you see that Broadcasting had been weak for long and is still weak. Well, the best Short opportunities have passed. And the Long opportunities are not ready yet. You may keep an eye on the Industry to see if its starts to turn from magenta to cyan. That might give some Bottom Fishing opportunity. Wait for that. That day will come when Broadcasting turns cyan. And CUE Edge will show that in Real-Time.
On the other hand, Construction Machinery & Heavy Trucks is an Industry that was strong before (cyan) and is becoming weak. It may be time to protect profit in any Long position in this Industry.
Do you take Short trades? Then it may be time to drill down to the Stocks in this Industry and look for the Fundamentally Weakest Stocks. You can do that in CUE Edge of course.
Drill down from industry to STRONG/WEAK stocks in secs
Another mouse click. And in seconds you can identify the Fundamentally weakest Stocks in this weakening Industry.
The Vital Statistics tab calculates and puts together all the key and only the essential Fundamental parameters of the Stocks in an Industry. Vital provides Scores across multiple dimensions and applies consistent color coding to let you quickly carry out a Visual Peer Analysis and identify the strong and weak Stocks.
Magenta and Low Score Value is weak. Cyan and High Score Value is strong. It is that simple.
TEX (Terex Corp) is undoubtedly one of the weakest. It is overvalued, recognized instantly by magenta color and low Score in the Relative Valuation Score. It is having poor Growth relative to Peers - as is known from the magenta color across the EPS and Revenue Growth columns along with Low Scores.
It is also near 52 Week High. Would it not be nice to be able to Short the Stock at such high level?
At a minimum, looking at the Industry changing color from cyan to magenta and seeing this Stock Overvalued and having poor Growth, one would book profit or use Stop Order to protect profit.
There is more insight in this Vital tab. The shaded backdrop shows that Growth is in fact negative. And you get the prize for guessing it right. You can drill down to see the exact growth data - visually again.
Analyze key fundamentals using visual data
Growth is one but not the only area of Fundamentals that you can drill down.
You can see Performance data and conduct Visual Peer Comparison across multiple periods from as long as one year to as recent as today.
You can see Stocks' Fundamental Valuation parameters and compare Stocks in the same Industry.
There are other insights also that you may get from CUE Edge.
For now, if we focus on the Growth of TEX, we see that its Growth is slowing down and has become negative in recent years. Not a time where you would like to add to already existing Long positions. You may start to consider booking profit. Or even look for Short?
truly highest probability long & Short term trades
There you have it.
You are now able to drill down from Sector to Industry. And then from Industry to Stocks and get a comprehensive insight from Fundamental Ranking and Peer Analysis of the Stocks. Delivered by CUE Edge. Powered by the reliable data from Metastock Xenith (Thomson Reuters EIKON).
What is the result? You can catch the move in an Industry well ahead of others. Be it in the Long Direction or the Short Direction. Finding them just at the moment they start to turn up or down and then riding them until the trend reverses; that is the Industry rotation is complete.
Using this Unique yet, Easy to Use Visual Tool you are also able to decide in minutes if a Stock meets your standard for Long Term Holding. Or is it merely a Short-Term Play as a Swing Trade. You can see if a Stock is Overvalued or Undervalued. Is it having higher or lower Growth relative to peers? And much more.
For Swing Trading, you can take Longs only in strong Industries and in Fundamentally strong Stocks. And take Short Trades in weak Industries and Fundamentally weak Stocks.
Using this unique and multi-faceted CUE Edge, you can trade with a lot more confidence, knowing that Sector-Industry strength/weakness, as well as the Stock's Fundamental strength/weakness, are aligned with your trade.
Finally, of course, you would like only to Buy a Stock that is going up. And Short a Stock (including TEX) that is undoubtedly going down. For that, you may use CUE Charts Technical System and its unambiguous checklists to identify a trade setup at the right edge of the chart. You may refer to our Education Center for more information on that.
And if you are those who would rather watch a video than reading detail books, these Weekly Roundup Videos will show you CUE Edge and CUE Charts in action on Live Market.
The possibility of these Long and Short trades was shared in Superior Profit Traders Community a few days ago.
At that time we had a profitable trade in Finish Line (FINL), a Stock that we had analyzed in Weekly Market Roundups as Fundamentally Strong and at Optimal Price. We had used 360 Degrees Analysis for Finish Line at that time.
Here we provide the follow up in detail to the possible Long and Short Trade-Ideas. By joining the Traders Community, you could have a heads up on the trades probably!
We begin our 360 Degrees Analysis with CUE Edge Industry Analyst. It calculates the performance of 160 Industry Groups across multiple review periods and assigns Ranks and Heat Map Colors that instantly helps us see which Industries are getting stronger and which ones are getting weaker. Reading the data is easy. Magenta color means weakness. Cyan represents strength.
From the easy to read Visual Heat Map, we can instantly see the following:
1) Apparel Industry was languishing at the bottom for many months, with some of the worst ranks (160 being the worst possible rank among the 160 Industry Groups). Today, on 12th July 2017, it improved rank from 131 to 108.
2) Clothing and Accessories Industry was weak 12 months ago. During the month 1 to month 5, it tried to improve a bit. In the most recent periods, this Industry has again declined in Rank, indicated by the magenta color in the times from 10 days to 1 day.
What about their Fundamentals? We have a look at CUE Vital Scorecard for that. For CUE Vital Fundamental scoring, green and blue means strength and magenta, red represents weakness. Higher scores mean the Stocks is stronger than others in the Peer Group.
From Visual Scorecard, we can instantly see that LB (L Brands) is priced optimally and has strong fundamentals at the current price. And COH (Coach) is overpriced and poorer (than LB) earnings quality.
What about their Technical Analysis view? We use CUE Global for that.
LB dropped along with the Apparel Industry since Dec 2016 as seen from the CUE Hop On Daily chart. At the right edge, it stopped going down after exhausting down move that began in July 2017.
Technically, LB may give a possible Bounce Long Trade Setup. You may check the Unambiguous Checklists of CUE Trading System to pinpoint the Entry of either a Swing Long Trade or even a Long Term Investment. We have already seen from CUE Vital analysis that LB is fundamentally strong - this is our preference for Long Term Investing.
You may also keep an eye on Apparel Retailers Industry Rank from CUE Edge in coming days to add more probability of success to your Long Position's favor. That is, Buying LB if the Stock goes up and the Industry also shows strength.
Contrary to L Brands, Coach (COH) had a nice rally since Dec 2016. But now it is looking a bit tired. That, along with its weak fundamentals and the Industry's (Clothing and Accessories) weakness means one may consider booking profit or at least protect profit using Stop Order. CUE Vital Fundamental showed it is Overpriced!
Short Traders may even look for potential Short opportunity using CUE Global's Unambiguous checklist to pinpoint Short entry.
Using 360 Degrees Analysis in this manner, combining Industry, Fundamental and Technical Analysis, you can invest and trade confidently. Knowing that you have looked at the trade holistically before taking it.
And that is the Superior Profit Way.
Have you wondered how and why Stock Analysts regularly promote Stocks that are at 52 Week High and say how wonderful Buying Opportunities they are? Why they wanted you to Buy the Stock at the very top and not while it was going up from a lower price?
Take Tesla (TSLA) as an example, seen using CUE Hop On chart template. In the chart, green/cyan are Bullish, red/magenta are Bearish. Yellow is Neutral.
If you were listening to the media and Stock Analysts, you were probably hearing a lot about Tesla going up and up and away.
However, Tesla dropped after displaying several magenta (Flow) color Candle in this Daily chart. Using information from the CUE chart and the Fundamentals of the Stock using CUE Vital Fundamentals, you could Protect Profit in Long Position and possibly get ready to Short the Stock for Swing Trading.
Tesla is just one case. Instead of relying on other's recommendations that seem to confuse more than help, you could come up with your Buy/Sell Recommendation of a Stock yourself quickly and objectively using CUE 360 degree analysis. You could do that with Tesla, or with any other company in the world.
Here is another example of how CUE Traders gave a Buy Recommendation on a Stock in the USA Market using CUE 360 degrees analysis.
The Buy conclusion on the Stock CECE (USA) was achieved by combining Industry Analysis (using CUE Edge Sector-Industry Analyst), Fundamental Analysis (using CUE Vital Fundamental Analyst) and Technical Analysis (using CUE Global Technical Charts). This holistic CUE Analysis gives you a 360 degrees view of what is going on in a Stock. And you can Buy (or Short) more confidently.
CUE Edge Industry Analyst
CUE Edge Industry Analyst ranks Industry Groups in Real Time to show which ones are getting stronger and which ones are being weaker. This Ranking updates in Real-Time. You always have the most up to date information at your fingertips.
You do not even need to read the actual Ranks. Reading the Heat Map colors is enough. If you see an Industry is changing color from magenta in earlier months to cyan in recent months, you know it is getting stronger.
If you see multiple related Industries are getting stronger at the same time, then you have more confidence in the strength, which was the case with Industrials when we analyzed them in the Live Weekly Market Roundup of Saturday, 1st July 2017 (this is shown in the CUE Edge Industry Ranking Table above). Recording of the session is available on Video Center under Weekly Market Roundup.
How might you use this insight? If Industrials were gaining strength, you could look for Buy Position in Industrials, of course!
CUE Vital Fundamental Analyst
As a Stock Analyst, your next task as to find an Industrial Stock that had the right (low) price. CUE Vital Fundamental Analyst helps you do this analysis visually in minutes.
CUE Vital analyzes a Stock in itself and also relative to its Peer Group of Stocks. Presents all the data into multiple categories using easy to read color codes. There are various pieces of Fundamental information. For quick decision, you might just look at the CUE Vital Scorecard.
When we analyzed CECE using CUE Vital, the Scorecard looked like this on 3rd July 2017.
I will point to the few pieces of information here. You may get more detail on it from the Education Center.
1) CUE Vital can fetch a Stock's (CECE, in this case) Industry Peers and compared the Fundamentals. CUE Vital applies a Score of 1 to the weakest Stock and bigger scores to stronger Stocks across multiple dimensions. And finally, CUE Vital creates a Heat Map using intuitive color coding. Green/Blue is "healthy" or "preferred" condition. Red/Magenta is "weak" or "not preferred" status. Yellow is Neutral. That simple.
2) From column B you could instantly see that CECE had one of the best Earnings Reliability Score. Just seeing the Blue color was enough.
3) From column C you could immediately find out that Relative to its Peers, CECE was valued optimally. Blue background color told you that.
4) From column D's Blue color, you could infer that CECE had high Internal or Intrinsic Value.
5) Additionally, from column I, you could observe that CECE had a high possibility of Short Squeeze, again, merely reading the Blue color did the work for you.
What you had then? A Stock (CECE) with High Earnings Reliability that was Optimally Priced in itself as well as in comparison to its Peers and the Stock had a chance to shoot up due to Short Squeeze.
We already saw, using CUE Edge Sector-Industry Analyst that the Stock was in an Industry that was gaining strength.
You needed one last check before you could decide to Buy this Stock.
CUE Global Technical Analyst
You only make money Buying a Stock if the Stock goes up.
If you buy it while the Stock is going down, that is called "catching a falling knife". And you end up losing money. You probably would rather Buy a Stock that is not falling, like all other CUE Traders.
Therefore, the third and the last leg of CUE Analysis before deciding to Buy a Stock is to see if the Stock has stopped falling. Starting to go up. Or at least, forming a Base at the bottom and showing signs of strength.
You can analyze all these (and more) using CUE Global Technical Analysis. CUE Global Charing is also a Visual Tool like CUE Edge and CUE Vital.
On 3rd July, CUE Global chart of CECE looked like this (seen using Backdrop Weekly chart on the left and Hop On Daily chart on the right).
The chart labels tell the story. You may learn more about the colors and indicators on the chart from the Education Center.
Now, with the 360 degrees analysis, you had a Stock with a Buy Recommendation. Recommended by yourself!
And your recommendation would work well.
This trade idea was posted in Superior Profit Traders Community on 3rd July (here is the link to the post). And within two trading days, on 6th July, it has hit the Profit Target.
You may use the CUE 360 degrees analysis in this ways on any Market and any Stock in the world.
A) You might look for Industries that are weakening to either Protect Profit in Long Position or even to Short a Stock using CUE Edge Industry Analyst.
B) You might look for Fundamentally Weakest Stocks for Shorting and the Strongest Stocks for going Long using CUE Vital Fundamental Analyst.
C) You could pinpoint the exact Entry and Exit points of your investments and trades using CUE Global Technical Analyst.
With these three tools, you have everything to be your Stock Analyst. And invest confidently for profit.
Tesla had a stellar performance in last one year. Going up by 53% while S&P500 (SPX) went up by 21% in same period.
Out of that solid TSLA up move, last 3 months has seen a growth of 43%. SPX increased by only 7% in that period.
This lead to the quarterly earnings announced on 22nd Feb 2017.
What about so called experts' views after earnings data came out? Several of them came out with positive comments on Tesla like Baird's comment (seen from Thomson Reuters News): "Tesla Energy's potential is still undervalued", "Tesla suits the Made in America Theme ..." etc. And even went on to raise the price target of Tesla to 368. Tesla Close don 22nd Feb 2017, after earnings result was announced, at a price of 273. Huge potential upside - isn't it?
All these may lead a Superior Profit Investor to buy Tesla now. Not so for Superior Profit Investors. Why?
To start with, Superior Profit Investors are not lured by news events to buy at the top. Following Superior Profit Way, they would have taken a Long position in Tesla many months ago. And they would book profit or protect profit at current levels. Tesla is currently at CUE Pendulum High level now - too high a price to enter Long. Superior Profit's optimal place to enter Long Term Investment is at Pendulum Low Level.
Secondly (and secondarily; as Superior Profit Investors prefer to do their analysis rather than relying on others' estimates), though some analysts upgraded Tesla, the current target price of Tesla based on aggregate analyst estimates is about 245, which is about 10% lower than the current price. Current aggregate analyst recommendation is Hold and not Buy or Strong Buy. Also, though Tesla Q4 Revenue was somewhat above expectation, Q4 EPS came quite below expectation, and turned negative from positive.
Thirdly, as seen from the CUE Line Chart of Tesla using Weekly interval, it is at a resistance price zone and not at a support price area. This multi-peak resistance area is not a time to take a Long position in a Stock.
Finally, when we look at Tesla using CUE At A Glance view, which combines Weekly Backdrop chart with Daily Hop On Template, we see several indications of not going Long. And probably even signs to take a Low-Risk Short position in Tesla right now. Why so?
In Superior Profit Way of Trading Profitably, Fake Breakouts at CUE Memory or Watermark levels accompanied by Heavy Activity often gives us a Low-Risk Entry Point. Weekly Backdrop chart of Tesla is showing such Fake Upside Breakout. What's more, the Fake Breakout is happening at the same level where CUE Bearish Headwind foretold a sharp drop in Tesla around July 2015.
In summary, what is our view of Tesla for those holding a Long position? We suggest you book some profit. Or, at a minimum, tighten Stop.
In Superior Profit Way, we only take Low-Risk Trades that also have High Probability of success.
If you decide to Short Tesla at the current price, you might book or protect profit using CUE Protection price level once the Risk Distance ( the difference between Short Entry Price and Stop Price) is reached or if Tesla hits a Support Price Level after your Short Entry.
Where is the current Stop Price level for any Short position in Tesla? CUE System Traders use CUE Protection level for deciding that. In the last up move of Tesla that started in Dec 2016, this same CUE Protection let Superior Profit Traders hold on to Tesla Long position for the long haul and get a very significant profit while protecting it along the way with Stop orders. This same CUE Protection indicator may now be used for the Short position as indicated in the CUE Hop Off Template chart.
There you go. With Superior Profit analysis of Tesla, right after its earnings announcement on 22nd Feb 2017.
Our traders share such trade ideas regularly in our Traders Community (in forums including Trade-Ideas from Superior Profit, Graduates-Club, the invitation-only club for traders from around the world, etc.), and we discuss them frequently in our Live Classes. You may check those out. They are open to the public for free. As a Superior Profit's way of saluting the serious trades from all over the world.
Citizen of Main Street.