🧠 Understand the 🚂 American #Railroad Sector 🚃 Rally of Nov 2013

🧑‍🏫 Step-by-Step Explanation 🏫 of the successful 🏭 Sector Uptrend 📈 in the 🚂 Dow Railroad 🚃 Average (DJUSRR) and the North American Railway Sector during November 2013, which occurred after a 🏭 Sector Breakout 🎆 on 22nd November 2013.

by Charles Adams

1) 🐤 Early-Bird Breakout 🎆 - The Leader

Numerous research papers have proven that sectors represent an increasingly important fraction of security returns [1]. Within the transportation super-sector, the railroad sector constitutes an important constituent alongside the airlines, courier, marine and road sectors [2]. As a logical result, returns across the various individual stocks within the railway sector are highly correlated and display lead-lag relationships or concerted moves which can be exploited for great profit.

On 23rd October 2013 NSC exhibited a sudden remarkable jump in its share price, surging 6.77%.

Simple Chart of the DJUSRR Quad as per the Dow Template. Fig.1: Leader Breakout in NSC on 23rd October 2013. Kindly Click to Enlarge the High-Quality Sector Rotation Chart.

However, as the other heavy-weight large-cap stocks in this sector did not participate in this rally, this single-stock move did not qualify as a sector breakout. It was hence NOT to be traded as such isolated spikes are prone to failure.

2) As It Happened: The High-Weight 🏭 Sector Breakout 🎆 on 22nd November 2013

Instead, the sector rotation trader would wait to see if the rest of the sector would start participating. Meanwhile, NSC remained in a tight bull flag after its massive jump. This is often a sign of the leader dragging up the entire sector. On 22nd November 2013 a bullish sector breakout finally occurred in the DJUSRR Index:

Simple Chart of the DJUSRR Quad as per the Dow Template. Fig.2: Sector Breakout in DJUSRR on 22nd November 2012. Kindly Click to Enlarge the High-Quality Sector Rotation Chart.