Barchart.com's Chart of the Day - Power Solutions International (PSIX) for Nov 12, 20

[Thierry Martin]

For today's essay, it would be wise to remember the old investing adage: "The trend is your friend."

As most investors already know, investing in trends is one of surest ways to success in the stock market. But while the phrase itself is simple enough to understand, we often find that most investors don't know which trends to follow... or even worse, invest in the wrong ones.

Specifically, we generally find that investors want to focus on economic trends... things like interest rates and global debt/GDP ratios. Some investors go so far as to follow the cover model for the current year's issue of The Sports Illustrated Swimsuit Edition, believing that when the model comes from the U.S., the S&P 500 is likely to outperform.

Not to berate the homemade economists of the day, but these investors are most likely wasting their time.

The truth is, economic trends can (and should) be mostly ignored by investors.

Even economists -- people who have dedicated their entire lives to following macroeconomics -- can't accurately predict when a major economic event has (or will) occur. It took the National Bureau of Economic Research (NBER) 15 months to announce that the recession ended in 2009 was officially over.

But if not the economy, then what trends should investors focus on?

StreetAuthority analyst Michael J. Carr answers that question in his latest issue of Maximum Profit. As Michael recently told his subscribers:

As investors, it is more important to focus on trends within the stock market rather than trying to beat the experts to a recession call. As the strength of the economy changes, investors move between different sectors in the stock market. Spotting these trends can be more valuable than beating the NBER to announce when a recession starts.

As the economic cycle progresses, investors become more and less aggressive. This behavior leads to sector rotation in the stock market.

As one of the largest investment research companies in the country, our experts here at StreetAuthority have made careers out of assessing these kinds of trends. From commodities specialist Dave Forest to our resident high-yield expert Nathan Slaughter -- there isn't a corner of the investing universe that doesn't get covered by at least one of our talented analysts.

Michael J. Carr has now taken that research one step further...

A few months ago Michael developed an investing system designed to individually analyze each of the trends that the StreetAuthority analysts are covering. Using this proprietary system, Michael weeds through all the analysts' recommendations -- across all their premium newsletters -- and selects the stocks he thinks have the most potential to outperform the market in the coming months.

The results thus far have been promising...

On August 16, Michael's system identified a "buy" on Hexcel Corp. (NYSE: HXL), a $4 billion industrial manufacturing company with a focus on lightweight materials used to build airplanes and wind turbines.

Amy Calistri originally identified Hexcel in her August issue of Stock of the Month. At the time, Amy thought growing orders for airplanes would spur demand for the company's lightweight transportation materials.

Turns out she was right.

[Thierry Martin]

The Chart of the Day is Ubiquiti Networks (UBNT). I found the stock by using Barchart to sort today's New High List for Weighted Alpha and this stock was 280.70+. You can see from the chart that there have been a series of Trend Spotter buy signals including the one on 9/26. Since then the stock is up another 18.98%.

They are engaged in the business of designing, manufacturing and selling broadband wireless solutions worldwide. Their products and solutions include radios, antennas and management tools and other applications in the unlicensed radio frequency spectrum.

[Thierry Martin]

Random Thoughts


You have to be careful not to chase your own tail when a market is hovering around new highs.

Thursday was ugly but Friday was a do over for the Ps and Rusty.

The Quack snapped back nicely too but didn't quite erase all of Thursday's losses. Still, over a 1 ?% gain is nothing to sneeze at.

As I said on Friday morning: "...if, and that's a big if, the market rallies an takes out Thursday's high, I think it would be off to the races. It would suggest that Thursday's action was just a shakeout/fakeout. In fact, I'm seeing buy setups in the Q shares. They have a Double Top Knockout look to them (email me if you need the pattern).

Errata-On Friday I wrote "inverse Q shares." I meant to write "leveraged." I know, big difference.

Considering the above, now that the shakeout/fakeout is behind us, I think this we could be seeing new highs on the horizon. You know the routine though, take things one-day-at-a-time.