Using Industry Performance to Find Stocks

With this post, I’d like to show you one (of many) example of how you can utilize the information I’m providing to streamline your stock selection process.

Tonight, lets take the information provided in today’s “Unusual Weakness” category.  Recall that industries that reside here have a current score that is at least 2 standard deviations below the historical mean score for that industry.  Therefore these industries may be considered ‘oversold’.

Looking through the list of industries populating this list, I can see that Auto Dealerships have the highest score ranking among all of the candidates.  With this information in hand, you can find your way to any number of different sources that provide information regarding what stocks are found in each industry.  After perusing the charts (and fundamental data) of stocks in Auto Dealerships industry, I have come up with an interesting candidate:


This stock has held up reasonably well while this industry has experienced abnormally weak performance as of late.  Auto Dealerships were ranked as high as 11 on 5/6/11, so at that point, it was one of the very best performing industries.  The extreme nature of the current score leads me to believe that the downside is rather limited for this industry in the near future.  $AN is attractive because of it’s relative strength compared to other stocks in the industry combined with the (relatively) calm nature of this chart (which is something -I- look for in potential buy candidates), so I will be keeping an eye on this one.

Again, I have just started to delve into the potential uses for this tool, thus I’m excited to share some of my thoughts with all of you.

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