| Trading Strategies using the Ranking Table |
| 1. Money Flows and Sector Analysis — The Ranking Table provides a macro overview of the market showing which sectors are bid and which are offered. |
| 2. Stock Selection — When a sector or index is isolated the component issues that are driving the strength or weakness, are presented in ranked order. |
| 3. Matched Pairs Trading — The Ranking Table breaks down a sector from strength to weakness, quickly isolating potential matched pairs spreading opportunities. |
| 4. Option Volatility Strategies — An MC Value Rank of (0) on the table shows the sectors and component stocks that are in a neutral position. These directionless stocks are good candidates of short premium strategies alone or covered. |
| 5. Extreme/Reversal — Stocks or sectors at the upper and lower extremes of the Ranking Table can show good reversal or exhaustion opportunity. |
| 6. Basket Trading — The Ranking Table enables a quick creation of "smart baskets". Traders who use broad-based or sector indices as a momentum indicator to trade stocks in those sectors can create "smart" bid baskets and "smart" sell baskets. Bid baskets contain positively ranked stocks and sell baskets contain negatively ranked stocks. |
| 7. Spread Trading — Interest rate strip and yield curve spread trading are available using the Interest Rate Ranking Tables. Currency cross-rate spreading opportunities can be found in the Foreign Currency Ranking Tables. Commodity calendar and inter-market spreads can be created using the Commodity Ranking tables. |
| Practical Application |
| The best way to start using this tool is to look at the Ranking Table for the overall market, the U.S. Sector Index Ranking Table. |
| The Table compares the MC Values of the U.S. broad-based and sector indices to each other. This feature shows the technical “money flows” of the overall market enabling a user to quickly pin-point which sectors are in a strong or weak technical position. Once a sector is isolated, the component issue Ranking Table can be accessed to show which stocks are driving the sector up or down. |
| Stocks with a higher Beta relative to the broad-based indices, such as the SP, ND and DJIA will have the benefit of using these markets as an indicator. |
| Markets with like MC Values will share an equal rank on the table. Traders should note the different MarketColor system positions when doing comparative anaylsis on these like ranked markets. |
| Using the Price Map analysis with the Ranking Tables |
| Risk Management - The Price Map was designed as an aid in providing trade initiation and risk management. Liquid futures contracts such as the S&P500 and NASDAQ100, representing over $50 billion in notional value transacted each day, provide a good overview of the general market tone. By noting the key Price Map levels for the broad-based indices a trader can greatly enhance the execution proficiency in equity trading. |
| Example |
| Beta is better – Stocks that have a high correlation with the broad-based indices, such as the SP, ND, DJI, will be influenced more by intra-day swings in these indices. Traders should note any divergences. For example; the ND goes negative on the day and is breaking down to its DP. CIEN, which is higher on the day, remains positive and is not breaking but is languishing in a sideways trade. As the ND approaches it’s DP and shows signs of finding support, by not being able to penetrate the DP price level, this would be a buying opportunity in CEIN. As the stock was not able to break when the underlying index broke and any positive or non-negative action should allow the stock to rally. |
| Conversely, JNPR takes a tumble when the ND starts to break down to its DP. As the ND starts to find support, the stock pauses. When the ND bounces off its support level JNPR continues its sideways trade unable to rally. When and if the ND approaches the directional <>, a test and rejection from this resistance would provide a selling opportunity in JNPR as the stock is already showing negative tendencies and any negative action in the index would expect an exaggerated effect in the stock. In addition a failure from the ND DP would be an aggressive sell signal in JNPR, as the general market is now in a strong negative posture, trading below the DP. |
