Finding Opportunities with Relative Strength | Michael Fairbourn, CVA | 3-5-20 | Building Blocks


alright folks let’s go ahead and get
started it’s great to have you here with us this evening for our building blocks
for software keyed portfolio my name is Mike fabrics you can follow me my
twitter handle right there now for this evening we’re to talk a little bit more
in detail about big-picture components of your self-directed
portfolio we’re going through interesting times right now we’re going
through a phenomenon okay the coronavirus it has a number of
unknown events in many ways the you know as we’re seeing different data come in
some of the data is not being reported a number of the active accounts active
total active accounts have been going down for the last 10 days but different
parts of the world have more active accounts or active cases occurring so
one of the biggest components is we have this nosedive in China where they’re
containing the cases but we don’t know the expansion of this what I want to
talk about with you this evening are areas within your portfolio that we’re
seeing strength in the market strength within given securities I think that’s
important for us to focus in on a lot of times when stocks come down less than
the general market or they stay up high or even they go up these are areas where
we can really see some improved strength once the market if it’s able to come
back if it stays into a sideways range for a long period of time these
companies will oftentimes be the first out of the gates and so as many of you
as I suspect have long portfolios where you’re owning shares of stock I want to
look at ways and tools to help you better understand how to take advantage
of you know finding strength in the market so I’m gonna do that this evening
with you hello to Jimmy Fitzgerald Clarence Ricardo Robert and
am good to have you all on board let’s quickly at our disclosure items so we
can jump into this this evening but that’s oftentimes what we talk about in
this class or just ways to manage a portfolio or look at big picture
elements of a portfolio around current market conditions so it’s great to have
you all here folks please keep in mind the points that are in fact listed here
futures of futures options is is speculative it’s not suitable for all
investors additional points here in terms of options are not suitable for
all investors as well please be mindful of transaction costs in addition the
paper running application is for education purposes only past performance
of any security strategy does not guarantee future results or success at
all investing does involve risk including the risk of loss having said
that let’s do a brief market overview then what we’ll do is we’ll take some
time to look for relative strengths in your portfolio looking for relative
strengths in your portfolio so we’ll do that next let’s jump right on into this
okay so first off first and foremost let’s take a look at the general market
here so SPX okay I’m gonna go ahead and pull this up
right now so on the SP 500 index I’ve got a few Fibonacci lines in here what I
was really just trying to show is that we did come down and we bounced off a
long-term 50% level the reason why we tend to focus on the markets in this
class is about you know it’s been estimated between 3/4 and 80% of stocks
in the market will tend to go up or down with the market now you can’t quote me
on those numbers they can’t go higher they can go lower but a large number of
stocks will move up and down with the market so it’s important to know what
the market is doing and also looking at relative strengths to the market are
there some securities that are holding up better than the general market or not
as good as the market okay so we do spend some time looking at the market in
this class now we did have a pretty large pullback here as you can see about
16 percent real close to it from high to low we’ve bounced up and now we’re kind
of holding near this upper channel line so that could be an interesting level
for us to hold historically though there have been a few a few situations within
the general market where we pull back from high levels 26 2011 was one there
have been two some others in the last ten years as well but here’s just an
example in the general market where we do take a pretty sharp dive from high
levels quickly folks oftentimes the market will tend to go into a sideways
range it doesn’t have to but frequently it does I just want to make sure that
those of you to attend this class understand that and
there may be some probabilities to suggest no guarantee but some
probabilities that the market may in fact flatten out a little bit especially
around that $3,000 range or around 29 maybe it does maybe do we do go into a
double bottom we’ll have to wait and see but in the meantime I want to take a
look at some securities that have maybe held up better than the general market
so this RS this relative strength indicator that I’ve added in over here
as you can see on the right hand side relative strength on the S&P 500 if you
click on that it does default and it puts a benchmark on the performance of
all the securities that you’re examining relative to the market itself okay so
what I’m looking at doing right now is I’m simply just going to add that
indicator in and I’m going to compare it first of all to the markets what markets
out there here is the Nasdaq 100 how has it been
doing relative to the Nasdaq 100 we’ll take a look at a 1-year chart so what
the RS indicator tells us is if it is going higher it tells us that the ndx
has been outperforming the benchmark the market itself the S&P 500 so by and
large folks just a better and stronger grouping of securities that would be
part of the Nasdaq 100 now what is that that’s technology those are technology
stocks okay mainly technology and the larger technology securities that you’d
find out there in the Nasdaq 100 okay we can look at that which we’ll do in just
a moment here within that – I wanna take a look at the Russell how is the Russell
doing relative to the S&P 500 not good in fact it’s recently began to tell off
pretty sharply down through here so some risk in the smaller cat groups of stocks
how about the Dow Jones the DJI Dow Jones underperforming the S&P 500 what
does that tell us if a large number of stocks will go up
or down with the market the S&P 500 Dow Jones stocks small caps have been
getting hurt but technology’s been holding up and within technology you’re
also getting biotech okay within that Nasdaq 100 as well so those are some
strong areas now I’ve got some sector index sectors over here and you can find
also some there are sector ETFs out there that you might be familiar with
too you can take a look at those we’re just gonna look at index sectors right
now look at the industrial sector how is it doing relative to the general market
folks let me point this out to you right now let’s just grab this tool and point
this out look down here with me do you see that really sharp decline recently
they have not been not only were they not holding up recently with the market
from early November on they have really started to tell off recently let’s take
a look at the eye the ixv which is the healthcare sector a totally different
story flat through maybe towards the end of
the year first part of the year but folks they have begun to really
outperform the general market we’re going through this experience because I
want you to be thinking of stocks that are showing the most strength relative
to the market because they can be as I mentioned the first out of the gates if
the market were to go sideways or start to go back up again oftentimes and
historically you’ll see this frequently that those securities can outperform the
market so just some general guidance or not guidance but some general guides you
could say that traders investors might use some of them will use to be on the
right try to get on the right side of the market try to find the strongest
areas within the market a lot of times you’ll find these too I mean think about
health care right we do have the virus situation there are drugs being created
I mean just looking at some of the bigger ones you find out there are egn
that’s one that falls within the nasdaq-100 another one here Gilead
technology or Gilead Sciences can you see it spike up higher using a drug
a number of let’s see the US government has recommended or they have been using
a drug by Gilead scientists to help treat coronavirus patients okay
look at the strength relative strain to the market looking specifically at those
areas okay so this could be one tool to help you get into that area I want to
take a look at the Financial Group once again financials really getting smashed
oops sorry let’s do this so financials we had an interest rate cut that does
not help financial institutions whatsoever a big sell-off this week
remember there was a 50 basis point cut by the Fed in the Fed Funds rate that
can be good for maybe refinancing your home but if you’re owning financial
companies not nearly as a good Bank of America I took a look at this one
earlier today not great AIG insurance right that’s a larger group of financial
institutions brokers could fall into this group other categories just to be
to kind of name off a few but financial sectors as a whole as you can see has
been running in some challenges and that’s why we’re going through this so
now you can kind of see big picture what areas might be performing technology
nasdaq-100 we’re getting additional confirmation that the sector of
technology itself is actually performing quite well here let’s finish these off
here consumer staples people will buy consumers will buy consumer staples
that’s the term behind there right household products food things along
these lines they will buy them and they’ll buy them consistently
pharmaceuticals they’ll buy them in good times and bad and they’ll Vera way from
the discretionary which are actually down but look at that spike tremendous
spike higher so maybe a shift into that group
what about utilities absolutely people will will shut off a lot of things
before they shut off their power in their house it’s been going higher also
it got an additional boost here if if the Fed cuts interest rates
well these companies are heavily capitalized they carry a lot of
debt and when that debt is lower at least the variable debt that can reduce
the cost of a business and ultimately follow the bottom line and raise the
earnings of these businesses too so there might be a couple of drivers here
for utilities even still discretionary x’ just like it states discretionary
will go down as the discretionary item they might go out to restaurants less
they might travel less okay they might go to less casinos building materials
shoring up a little bit but still has been dam and energy still going down
shoring up a little bit but by and large going down so once we find an area like
technology here others health care but it falls into you do see some biotech
within the technology group I XT is actually the one we’re looking at right
here which has really had the longest performance and in terms of higher highs
and higher lows I mean relative performance she’s been trending higher
relative to the S&P 500 good gains in that particular group now what I want to
do right now is point out to you that if we go into market watch I have some
additional columns listed here I have yet been able to post this into my
Twitter but I will do that right when we’re done with our session I have some
of the formulas that you can use to plug in to your market watch and quote
section so what I’m looking at is the Nasdaq 100 here I’ve selected that it’s
just a great way to really see what companies within the groups that we’re
examining are actually staying strong which ones are holding up the best so
I’m in the Nasdaq 100 how did I get there I went into the drop-down box went
down under public and I simply just went under and found the Nasdaq 100 there it
is right there I pulled up there are 100 companies here you could find other
securities in here as well the Russell you know whatever but we’re looking for
strength right now so on any given day regardless what the markets doing some
traders investors might want to go in just look at the percent change what
areas got hurt the worst on any given day
well Airlines airlines Airlines resort resorts and casinos apparel and retail
hotels okay look at this Expedia so travel travel agencies align align with
you know somewhat with casinos and gaming people travel to those areas and
as well as Airlines but this gives you a big-picture perspective of where the
weakness was on any given day and and you can sort this just by clicking on
that Colin I’m sorry that was the percent change should have pulled that
over now you can see it this can be added in to these columns how do we add
those in we can right click on any one of these columns custom and sort now
folks I have left in here the symbol the description is what it’s called in the
industry or the sub industry on the lowest the lowest sort of category or
description of where that what category that company falls into so those are the
three that I like to use myself and these are updates these each of these
can be found in these available items over here all I’ve simply done is add
them in you can also find the net change and the percent change so that’s what
I’ve added in here and that’s how you can add these symbols just click on it
add the column to the right or take it off okay so that’s how that’s done so
you can see sort of how that’s set up a bit okay good everything is shown on the
screen so on any given day if I click on this column again it shows me the best
performers now this is citrix system so applications software some of these
software some of the companies you’re seeing in here that are software based
what you’re seeing and there were a few companies that were actually up today
but some that we’re definitely up better than the market the market was down the
futures after hours as you could see is up but the market as a whole was down
and here’s the S&P 500 index that we were looking at initially everybody see
that right there sorry let’s do this it’s better if I kind of highlight these
a little bit but right over here on the left hand side the SPX if I move this
over – 3.39
what companies held up better in terms of our benchmark the market all these
companies did because we sorted based on the best performers – the worst
performers now these companies perform the worst I’m just clicking on this to
give you that those ranges in there but these companies all closed up there’s
your Gilead Sciences by the way that closed up on the day this is a Chinese
company JD comm but this Chinese company what they do I looked at this earlier JD
JD you think about this in China is an online direct sales company online
people might not want to go out and shop because there are a lot of cities out
there in China right now that are literally just people are not they’re
just not on the streets they’re staying inside there they’re really quarantined
inside their apartment buildings especially around the epicenter of where
the problem occurs but also tell you the smog is starting to occur in China so
normally that’s not a good sign you know you don’t like a lot of smog
but it also means production productivity and a lot of the traffic
jams or all look also occurring in other areas where they weren’t occurring
before so the number of cases coming down might be a real thing because
people are actually getting back to work even to the point that you’re getting so
much work the smog is coming back hate to say that is a positive indicator
I don’t like smog either but you know in these kinds of situations yeah it’s it’s
known as a positive so it could be seen as a positive so coming through here now
this is the information that I’ve added recently now these are all think scripts
so this one-week return two-week return one month and three month and I’ve
intentionally stayed to a shorter time frame these have all been built and
they’ve been built by Ken Rose who does a lot of our thinks kryptonite I
appreciate Ken for providing the mean with these so I can provide them to you
and I’ll have them in my Twitter feed over here love you to subscribe if you
like but I do post my natural information in there as well as
stuff about stocks to there but I’m gonna have the code and I’m gonna show
you the process on how to add these in for these specific columns but this is
really important to have I think having a one week return two week return
especially around a volatile market condition lets us see what companies are
holding up the best and maybe we like those patterns maybe we like the trends
of these companies are the trend staying up higher highs and higher lows
certainly we’re looking for them to hold up better than the general market
because we’re trying to find the best performers out there okay where maybe
the money might be staying or flowing into so let’s take a look at this this
is a one-week performance metric in yet some of these are pretty shocking
numbers you know American Airlines down 22% UAL just behind it some others as
well but if we’re looking at the best performers there’s the JD re GN Rogerian
pharmaceutical pharmaceutical C TSX application software improvement of
efficiencies of businesses potentially why wouldn’t we want that maybe we’re
looking to cut costs at this stage whatever the case might be you got AMD
but technology companies take-two interactive Costco people go into Costco
to stock up I know they certainly are in my neck of the woods but if you go
through here you can list the sub industry so you can see a lot of these
yeah they’re in technology applications software as well now as we look at a few
of these I want to point something out let’s just take this take – for example
ttwo if I take a look at this company and I’m gonna minimize this for now
we’re using that relative strength you can still look at relative strength it
should be going up relative to the market but notice that we’ve broken
above some highs on take two over here and we are holding above that 115
testing the 30 day moving average these are these are indications that traders
investors might look for especially if you’re taking out possibly a long term
resistance level if you’re below it now we’re above it so it may in fact be
support sometimes technicians will look for stocks to hold here and potentially
run higher that’s what they might you know that’s
what they could be looking for but we’re seeing strength and this is kind of hard
to find in the general market if you’re just going through a lot of different
stocks you might not see this in your portfolio watchlist but you can use
tools like this just basic building blocks to help you manage your
self-directed portfolio help you be on the right side of the market
that’s the whole idea even under tough situations you’re still seeing some come
up here one thing I’m going to say it had a good last week it still went down
during the you know a lot of the sell-off during last week with a
coronavirus but this week we’ve recovered you know interesting things
that we can do is we can look at the two-year time frame and show you maybe
those that even held up better I’m going to see different stocks held up better
during the whole entire sell-off so American Airlines two weeks 43 percent I
keep you know harping on these but these are your groups that really got slammed
possibly the ones yes that you may want to consider right avoiding tied into the
coronavirus best performers over the press two weeks what’s been holding up
the best re GN gilja JD going down the list take two is still there it still
held up how many out of the Nasdaq 100 remember we pinpointed the Nasdaq 100
because it was holding up better relative to the S&P 500 index right
number we did that initial comparison and that’s why we chose the Nasdaq 100
now we’re just selecting the strongest stocks within that group over what we’ve
looked at today’s change but really over the last one one week to two week time
frame okay so these have all held up better than the general market what was
the market down over a two week time frame now it’s come up a little bit but
that initial weekend or so seven eight days somewhere in there was then about
15 16 percent look at these numbers by comparison they’ve held up tremendously
better so even though they’re going down a little bit
traders investors will look at it because they can snap up even higher
when the market starts to walk it if the market starts to go up I mean they’re
holding up they went up even when the market went down
if the market goes sideways or maybe down a little bit maybe they still tend
to do better because possibly the trends in these companies are still remaining
strong let’s just look at that JD for now JD can you argue with that trend
folks I’ve got a couple too that I wanted to show you just in this class
that we’ve been looking at in the class that I teach tomorrow which is actively
managing a self-directed portfolio we’ve been looking at strong areas too we’ve
used different tools to kind of screen through other other indices smaller cap
stocks that still had some strengths no guarantees they’re gonna go up they’ve
just been holding strength here’s one mA XR one that we have we’ve been looking
at in our own portfolio notice it’s been doing stronger too
we build a fundamental theme behind these companies – you know what’s
happening fundamentally as well within that Friday class that’s tomorrow at
12:30 by the way if you’re interested but as you can see over here we’ve come
down a little bit but we’ve we’ve we’ve shot up but but higher highs and higher
lows across the board a couple more here is work this is called slack
technology’s actually making a high today we pull back a little bit still
closed higher but we’ve come down this is actually an IPO they develop internal
efficiencies for businesses as well so companies like that often times relative
strength of the market over this time friend doing very well pretty much flat
with the general market over here but beginning to outperform
another one here found through just other means looking at this is a company
called square so it’s had higher highs and higher lows maybe holding a little
bit of a support level right now but I wanted to throw at least you know a few
of these out there for you to look at we might take positions on these securities
tomorrow in my class these are paper portfolio additions that we’re doing
right everything in here is for illustrative purposes as I mentioned you
know guarantee they’re gonna go up but these are some of the tools and
investors traders will use try to get on the right side of the strongest portions
of the market at least in the recent history all right now I have to talk
fast in this class because it and I want to get everything in because
there’s a shorter period of time in fact we’re almost out of time here so yeah so
we want to show you this folks and by the way anytime you’re looking to take
any additional classes here I wanted to just point out to you that you can
certainly do that take a look at any of our additional webcasts we offer 37 a
week the vast majority are archived under education and webcasts here as you
can see let’s go ahead and select archived events if you want to look at
technicals while investing would show you the fundamentals then you can look
for different instructors in here Michael Cillian myself I’ll teach a lot
of those but down through here active trader you’re gonna get some really
great coaches Cameron made Pat Mullaly Connie Hill John McDougall all the way
down the list in terms of technical analysis and other sorts of trading to
to really help you out so I do encourage you folks to take advantage of our free
products there all right now I’ve we might have time for some additional
questions I see one we go ahead and try to address that for you as well all
right hello to you for Breezy Oh Teresa Christine let’s see
Osborne as well thanks for all of you for joining us during this discussion
let’s see would it be smart to move to buy stocks of companies that are
currently at a low value so that when the markets inevitably recovers you
receive dividends you know so a lot of that so you have to base it on okay we
don’t know when the market itself would recover now you’re stating that you know
the market you don’t it’s at low levels and historically the markets just been
like this higher highs and higher lows over a period of time we saw even a sort
of a collective effort among central bank’s the US and other central banks to
cut interest rates to keep economies growing so you’ve got that working your
favor as well now your specific question about dividends well one of the things
you want to do with dividends I’m going to tap into this right now let’s say
you’re looking at a company like this I was looking at this stock today this is
a dividend aristocrat ExxonMobil they’ve raised their dividends each and every
year consecutively for at least 25 years and don’t quote me on this but I think
it’s around 45 years they’ve raised their dividends it might be a little bit
more a little less but definitely over 25 years each and every
year they’ve raised those dividends well to your point here Ashley you know I
think it’s a great question we go into the trade tab we go over here and our
underlying look at that yield we’re right up near 7% now I don’t know if
Exxon Mobil’s ever yield at 7% before the levels that we came down to today at
this 50 level put us back to 2005 levels so is oil gonna go away I don’t know I
mean maybe the stock is still drop lower oil probably won’t go away you’ve you
know central banks lowering interest rates economy’s trying to grow it
requires energy to grow the refiners are an area where you’re probably gonna be
able to see the biggest cost reductions in some of those areas but I mean
drillers ExxonMobil a company has a history of raising their dividends for
so many years very interesting and by the way you’re at an interesting level
here at 50 this doesn’t come up too much and I can’t say that it’s going to
recover here but one thing that investors traders will look at is look
down here look at the size of that volume a lot of times technicians will
look at this and say that could be capitulation selling just everybody’s
like we got to get out of this thing it’s just going down that’s it they
throw in their final you know their last shares now I that something’s gonna it’s
gonna be happen to some of those people but 40 million shares at these lower
levels at that kind of yield I see where you might be coming from there there
could be opportunities there no guarantees about when it will turn
around you know if it will turn around but you can watch it for additional
trends or indications in here one thing that investors can do Ashley to your
point is that to be a participant in something like this is they may start
buying some shares maybe if the total I wanted to buy was 500 shares of Exxon
baby I start off with one or two hundred shares or 100 shares maybe you know I
don’t maybe see a turn yet maybe I’m seeing indications
of a turn but maybe I don’t want to put everything in at once remember there are
opportunities now in terms of zero commissions of course they have to be
Exchange listed online and US stocks to get that but you know a lot of companies
qualify for that so buying in portions can be a way to kind of control your
risks without letting the Commission’s swing out of control yeah and that’s a
good point too yeah paper trades can always help I agree yeah that’s good
good good point there all right so let’s do this let’s pop over here and let’s
just finish this up it’s been great being here with you and love it if
you’re able to attend each week but folks in order to demonstrate the
function of the platform we did use actual symbols have our TD Ameritrade
does not make any recommendations return this above and a security or strategy
for individual traders an investment decision you make yourself free to
countess only responsibility folks please feel free to subscribe to my
Twitter handle as well as subscribe to our channel where you can get a lot of
additional insights on YouTube and so the YouTube main channel is just
investor insights so I do encourage you to subscribe to that subscribe investor
insights where this will be posted as well as other classes many other classes
okay so encourage you to do that we’re going to finish up on that and what I
wanted to say was hey you’re welcome great to be here with all of you I hope
you have a great rest of the evening get you next time everybody bye bye you

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