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The group ranking is low but I think the fundamentals and the technicals are more important when judging a stock. I have purchased a stock in the past that had a low group rating and it ended up working out.
My Notes for the L in CAN SLIM
Strengths. Sector is strong, it's rank moved from 30 on 10/31 to 4 on 1/9, an overall improving trend. The sector has been near the top of the 52-wk New High table. It's industry A/D rating is B-, which is great.
Weaknesses. No sector leading stocks listed in the IBD research tables. The industry Subgroup Composite rating is 72, meaning there are a number of laggards dragging the industry down. It's industry rank is 136 and trending higher (Higher is bad). But the industry has a number of stocks near new highs.
My interpretation of this. The sector is strong, but IBD research shows that only accounts for 12% of a stocks price move. The industry accounts for 37%, with it's poor ranking and subgroup composite score is like swimming with weights - if the other stocks in the industry begin to participate, it will be like dropping the weight, giving the stock a nice pop. I like the fact that the Industry A/D rating is a B- and a several stocks are making new highs, indicating it is at least not alone, reflecting split price action, with a few leaders moving away from the pack. I will be watching the other leading stocks in the industry, If I see a few of them rolling over, it won't be long before CFX follows if has not already. I would also take profits sooner as the high industry rank and low composite score will give muted returns - instead of 20%-25%, more like 12%-16% (reflecting the 37% influence that the industry has).
Some of the other sector leaders to watch: DCI, LECO, PLL. For industry leaders watch WWD & SHS for their price actions. If you see them rolling over, CFX may not be far behind. Laggard GDI just rolled over.
I would be buying, with the above caveats, if I did not already have a full plate of alternatives.
I agree with your comments about the industry weakness yet the 50 DMA vol has been strong over the last qtr with lots of blue wks. I took a small taste when it started the pocket pivot move with a tight S/L.
That Jan 12 volume is really hard to ignore. I read it as very significant that it is higher volume than any day since the IPO. I believe that will overwhelm any of the negatives. I think high volume pushing up above 32.5 would be a buy.
Be aware that GDI has lost the 50 day and it's in the same Industry group.
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