πŸ“™ Table of Contents πŸ“˜
  1. 🐀 Early-Bird Breakout πŸŽ†
  2. 🏭 Sector Breakout πŸŽ†
  3. 🏭 Sector Up-Trend πŸ“ˆ
  4. πŸ“ References πŸ“ƒ
  5. πŸ“˜ Bibliography πŸ“—

🧠 Understand the πŸš‚ American #Railroad Sector πŸšƒ Rally of Nov 2013

πŸ§‘β€πŸ« Step-by-Step Explanation 🏫 of the successful 🏭 Sector Uptrend πŸ“ˆ in the πŸš‚ Dow Railroad πŸšƒ Average (DJUSRR) and the North American Railway Sector during November 2013, which occurred after a 🏭 Sector Breakout πŸŽ† on 22nd November 2013.

by Charles Adams

1) 🐀 Early-Bird Breakout πŸŽ† - 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 πŸŽ† 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.

The Relative Strength Comparative (RSC) also showed a bullish Positive Divergence, adding to the power of the pattern.

3) Aftermath of the Sector Breakout: A Bullish 🏭 Sector Up-Trend πŸ“ˆ

The result was a profitable upmove over the next few weeks.

Simple Chart of the DJUSRR Quad as per the Dow Template. Fig.3: Sector Upmove. Kindly Click to Enlarge the High-Quality Sector Rotation Chart.

Note that the RSC exhibited rising Dow up-trends in all four constituents of the AssetCharts.com Dow Jones US Railroad Quad.

πŸ“ References πŸ“ƒ

  1. ^ McIntosh, Sector Strategist, p.30-31.
  2. ^ Pring, Active Asset Allocation, p.281, p.288.

πŸ“˜ Bibliography πŸ“—

Book Cover of The Sector Strategist: Using New Asset Allocation Techniques 
	  to Reduce Risk and Improve Investment Returns by McIntosh, Timothy J McIntosh, Timothy J. 'The Sector Strategist: Using New Asset Allocation Techniques to Reduce Risk and Improve Investment Returns'. 1st Edition. Hoboken (New Jersey): John Wiley & Sons, 2012. 226pp. ISBN: 978-1-118-17190-5. Borrow or Buy: [ amazon | biblio | worldcat | abe | isbnsearch | justbooks.co.uk | gettextbooks | goodreads | openlibrary | univ. manchester | librarything ]. Introductory work on sector rotation.
Book Cover of The Investor’s Guide to Active Asset Allocation: Using 
      Intermarket Technical Analysis and ETFs to Trade the Markets by Pring, Martin J Pring, Martin J. 'The Investor’s Guide to Active Asset Allocation: Using Intermarket Technical Analysis and ETFs to Trade the Markets'. 1st Edition. New York (NY): McGraw-Hill, 2006. 385pp. ISBN: 978-0-07-149159-4. Borrow or Buy: [ amazon | biblio | worldcat | abe | isbnsearch | justbooks.co.uk | gettextbooks | goodreads | openlibrary | univ. manchester | librarything ]. Advanced work on asset allocation and sector rotation.

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