Stockradar’s Stock Pick count and Portfolio are generated by Stockradar’s process driven approach to price analysis. Our mission is to qualify trend behaviour of each of the stocks we cover by assessing market sentiment towards each stock. This is critical in establishing a probability element to share price movement. The success of this approach is reflected in our portfolio results on the home page.

This unique approach to price analysis is outlined in the Stockradar Trading Strategy article and should be read in conjunction with the Trend Intensity Indicator both of which can be found under the About tab on the Stockradar home page.

The Stock Pick Count itself provides us with an equally weighted ‘measure’ of 160 stocks (approx.) as opposed to the market capitalised measure that the ASX/200 is. The ‘measure’ being the number of qualified up trending stocks versus those that are not displaying uptrend attributes and are thus considered trending down or neutral. There are currently (6/9/19) 52 trending stocks of 163 is the Stockradar portfolio. Thus, the market is broken down in to two groups. Stocks that have qualified trends and those that don’t. Thus, if we subtract the 52 trending stocks from the 163 covered stocks, we are left with 111 stocks that are not trending up. There are some interesting stocks in the non-trending group that may be considered as quality businesses, but sentiment says it is not their time. This occurs for every stock at some stage and is an important part in helping our portfolio construction which says we will not hold any stocks without qualified trends. They can cause a big drag on portfolio results. Have a look at some of the ‘red’ Trend Intensity Ratings in the Trading Centre and it might surprise you.

Why then is the ASX/200 at its highs? The ASX/200 is weighted by market capitalisation. A few stocks, namely the top 15 or so by market cap drive that index so it is not that useful when we are trading specific stocks other than the top stocks.

Stockradar focuses on a common-sense approach – stock specific analysis. Just as price is our focus for analysing stocks, because that is what we trade and profit from, so too is the stock specific analysis approach. We trade stocks not the ASX/200 which is more of a barometer of some 15 stocks. Thus, we have no built-in trend filter that includes the ASX/200 because its focus is only on few stocks.

It looks pretty in a trade plan, but it is of little real use to a trader/investor. It can filter out stocks with great potential and draw attention to stocks with little potential. Each stock will have its own individual performance and for the most part bear little resemblance to the ASX/200 price behaviour.

Can the Stock Pick Count be used as a breadth indicator? Possibly as it certainly reflects something very different to the ASX/200 and understanding what it is will help us understand how best to use it. The ASX/200 has weakened lately. Why? Let’s look at those top 15 stocks.

CSL, WES and NCM are strong and making new highs ( 16/9/19) and WOW is at a cycle high. All these stocks have been, and are, trending higher and have been for some time possibly with the exception of NCM a more recent addition to the Stock Picks. The four banks are relatively stable as is MQG, and WPL is weak. The recent weak link has come from a BHP, RIO, TLS, TCL and GMG who are all slipping having been trending higher strongly for some time. So, understanding the drivers are important as there are 5 of the 15 top stocks switching from up trend to neutral to down and that’s enough to curtail the index rally for now. This is a moment in time for the index and the group of stocks as a whole. Does index analysis necessarily help us identify other stocks with potential or even worse tell us to sell stocks that are rising in a trend? It seems it bears little association with the other stocks in the ASX/200. For example, CBA the number 1 capitalised stock on the ASX has a market cap of $141,282, 815,054. TAH the number 50 capitalised stock on the ASX has a market cap of $9,672,431,638 and is roughly 6% of the size of CBA. If we move down further to GXY, number 200 it is 0.00336% the size of CBA. No help there. These are just figures for example but you get my drift. Few stocks dominate the index.

The Stock Pick Counts purpose is to simply identify what stocks are trending higher and which ones aren’t regardless of the indices. Simple! My primary objective is to evaluate stocks on a stock specific basis. i.e. bottom up. This forms a solid platform for my capital preservation objective and being able to ride the waves of trend periods.

The Stock Pick Count is a trend barometer which could offer a more thematic background of concern currently due to the very low count of 52/163. Why are so many stocks performing so badly? Be it CIM CGC DMP AGL CGF PTM PPT to name a few high-profile pariahs of this market. Those stocks are off my radar simply because their price is moving in a down trend of lower lows and lower highs. The important difference to the Stockradar approach is that it is ‘index unaware’ and allows us to focus on trending stocks and is not market capitalisation focused. It also should heighten your awareness of market misnomers we are taught to believe but are for the most part rubbish. If you are a real trader or investor you need tools that work.

I use sub-indices but for only one reason and that is to ensure our portfolios are not too heavily weighted towards one sector. Stockradar’s current five stock portfolio weightings are below and at the moment it is equally weighted between the 5 stocks. I want to ensure they are not all in mining or health. There should be a reasonable balance – common sense – so I restrict weightings of any one sector to 2 stocks out of a possible 5 for this portfolio.

It is important to think for yourself, be yourself, think clearly with focus on what you want to achieve, understand what works, and what doesn’t (for you) and what you are going to use to get where you want to go.

The graphic below shows the Stock Pick Count in relation to the ASX/200. There is little synergy for the most part as it reflects the ability to respond quickly to market pullbacks (capital preservation) but there are significant divergences with the major turning points such as the 2007 high and the current high. There are still stocks trending but there are simply less of them. Meaning??