A Look at the Patterns Helps to Differentiate Stock Winners and Losers
by Richard Evans
Which stocks end up winners and which stocks end up losers are eventually explained by the “news.” In the end, there is always some fundamental factor that ultimately accounts for whether any particular stock is a winner or loser.
However, by the time the “news” is out, a stock quite likely has already made a major portion of its move, up or down. Technical analysis, on the other hand, can play a role in spotlighting which stocks are in the process of becoming winners and what stocks are in the process of becoming losers.
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For instance, NS Group was spotlighted in the July 1 Wall Street Journal NYSE Winners listing as being the top gainer over the prior three months, up some 131.7%. Higher net income of this specialty steel manufacturer for the current fiscal year was the reason given.
At mid-September, NS Group was trading over 30, up from 4½ at the beginning of the year, or up some 500%, a pace that, if continued, could well put NS Group at the top of the list for the year. As usual, the better gains stem from low-priced, turnaround situations. Its longer-term and more recent price trends are illustrated in Figures 1 and 2.
At the other end of the spectrum, on the July 1 Wall Street Journal NYSE Losers listing, was Chesapeake Energy, down some 52.5% for the second quarter. The reasons given for the decline were cuts in the exploration budget and declining production. Its longer-term and more recent price trends are illustrated in Figures 3 and 4.
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