Tuesday, February 20, 2007

Strategy: Under the Radar Sectors (Today it's Foreign Utilities)

As I've discussed before, I like to scan the top and bottom ten peforming sectors over a given time period for charts providing nice looking setups. While this is a good method for providing setups, it can also lead to a lot of "whipsaws" or failed setups, since just about everybody is watching these sectors. Therefore, I usually wait for pullbacks, rather than breakouts, when trading these stocks.

Another strategy I employ for finding interesting patterns is looking for sectors and stocks that might be flying under the radar. Instead of focusing on the top ten sectors, I set my sites a little lower, looking at the 11-30 best and worst performing sectors. Here you'll find stocks that have been performing well but haven't been plastered all over the media and blogosphere.

For example, have you heard much about foreign utilities? Surprisingly, this sector came up at the 13th best performing sector on prophet's industry rankings. Take a look at the sector chart:

Three charts made it to my watchlist: CIG, ENI and SBS. Here is CIG's chart. I'll be looking for a breakout above $50 or a pullback in the $47-48 range for entry points.

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