Learning to track acceleration is one good way to turn up solid stock candidates — sometimes ones that are off the beaten path — for your watch list.
This sort of research generally starts with either IBD's What's the Market Trend? page (today on B2) or with the daily Industry Themes column.
Investors can check moves among the 197 industry groups tracked by IBD on their own by turning to the What's the Market Trend? page. There they will find the Top 40 Groups table, generally printed just below the day's Big Picture column.
The left side of the table lists the group rankings (with 1 as best, 197 as worst). It also lists the group's ranking three weeks and six weeks earlier. The groups making the biggest moves, especially those moving into the top 20, are the ones to focus on first.
The general theory behind this approach is that it typically takes a lot of money to drive an industry group advance. Smaller, less expensive stocks can sometimes have a disproportionate effect. But normally, accelerating gains by several highly priced stocks within a group suggests institutional investors are hard at work.
That view is reinforced by IBD research showing that, among stocks posting winning runs, about half of the stock's initial strength is linked to industry group and sector strength. That makes and acceleration powerful validators for investors vetting stocks for their watch lists.
Currently, within the top 20 groups, Machinery-Metal Handling/Automation, Leisure-Gaming/Equipment and Electronics-Contract Manufacturing have made strong moves up the rankings over the past six weeks.
Subscribers to MarketSmith can easily find stocks in industry groups making big moves by clicking on the Markets/197 Industry groups icon at the bottom left of the chart page. Click on the 197 industry groups marker. Then click the name of the group you want to research and the stock in that group will appear on the screen. (If the Markets/197 Industry groups icon does not appear, click on the Default View icon at the bottom right of the chart page. This will bring up the options list at the lower left side of the page.) For subscribers who are not MarketSmith users, the best way to chase down stocks in an industry group is to use the search window on the home page at Investors.com. Type in "Industry Themes," followed by all or part of the industry group name. Make sure the Search Site function, rather than the Get Quote function, is specified. The results give you recent Industry Themes or Industry Snapshot articles focused on your specific group.
The Industry Themes column generally details industries making large moves in the rankings. The articles discuss some factors that are potentially driving the group higher. It points out some of the group's strongest stocks and discusses their chart action.
Plug these names into IBD's Get Quote or Stock Checkup functions at Investors.com. Both of these will give you the top five names in the industry, sorted by Composite Rating.
Stock Checkup also allows you to search for group leaders based on Relative Price Strength, EPS, SMR and Accumulation/Distribution ratings. This provides a powerful tool for getting inside some of the strongest stocks in an industry group being forced higher by institutional buyers.