In this chapter about the SCTR, I want to discuss how one might use the SCTR to find sweet spots. There are multiple styles that investors can use. I will show three, then focus on one.
Just a brief recap so everyone is on the same page. When a stock moves above an SCTR of 51 it is behaving better (technically speaking) than 50% of the stocks within the group. So an SP500 stock with an SCTR of 51% is just above average. A stock with an SCTR above 75% is better than 75% of the stocks in the SP500. If we move to the ETF's , the same rule of measurement applies but it is only better than the other ETF's in its SCTR group and has no correlation with the ranking of the SP500 stocks. So it will be compared within SCTR.US.ETF. In Canada, all the Stocks and ETF's are in one group as Canada is smaller. The SCTR.TSX group would be used for Canadian stocks and ETF's.
So let's look at a few stocks. Just some quick pictures.
Here is AAPL. We all know the wild roller coaster on this stock over the past year.
OK. AAPL makes a nice example due to the recent move in the stock. If you look up at the SCTR line, you will see starting in July 2011, AAPL made a move and had an SCTR reading above 80. It stayed up there for 15 months or 5 quarters. Then it stayed under SCTR 10 for almost 9 months. It made a brief surge above 75 (the Blue Line) and then fell back. It closed today at 80.0 on the nose. You can see the SCTR group and the Ranking level in the full quote box at the top. SP500 and 80.0 . So as of today, AAPL moved back above the top quartile minimum and into the top 20% again. This is extremely bullish. My analysis says stocks trading between 75 and 80 should be watched closely. Once they get above 80, institutions like to invest in them because they have stocks that are leading and outperforming the performance of the index. This success starts to show on the other ranking systems that non technical people use. So success gets more investment. Apple looks today to be right at the entry into the sweet spot. Looking at the price action, it is just coming out of a cup with handle base and moved into the highest price of the year. Nice! Does it need a stop below? Depending on your trading style, but that is how you can control your risk.