Please help with understanding Tiers

I've noticed that most traders who have posted on this site follow sectors religiously and base a lot of their trades on what those sectors are doing. For example, stock ABC may be mentioned as a "sector leader", a.k.a. a "Tier 1" stock in its sector, and when the entire sector is up a trader may decide to then go long on ABC. Other traders (i.e. Hitman) mention trading only or mostly Tier 2 (sector laggers) stocks, again based on what the sector as a whole is doing.

How do I know what stock is a sector leader (Tier 1) and which is a sector follower/lagger (Tier 2)? Don't these change with some frequency?

Finally, is there a site one can go to at which one can enter a stock symbol and then see an overlay of that stock's performance in comparison to its sector? I tried on Yahoo Finance where its chart has a box for "Compare to ....." but I try typing in various sector symbols and get an error message - I think I can only enter company symbols and not sector symbols.


Thanks in advance and have a great weekend!

 

Tier 2 stocks are generally those with a lower float (number of shares outstanding)... they have a tendency to lag the sector leaders and follow in sympathy. The theory is that a lower float facilitates larger relative moves in Tier2 stocks than in Tier1 stocks, since it takes less money to move lower float stocks.

 

Candle, I don't exactly follow you on that. If a stock has a lower float, then it would take less activity to push it in either direction. But in that case wouldn't it move faster than similar stocks with a larger float?

I would imagine that Tier 2 stocks might be those that are less well known than the Tier 1 stocks and so the higher interest in the Tier 1 stocks has a resulting impact on the Tier 2 stocks, but with a delayed reaction.

I think I understand the basic notion we're discussing, but don't seem to get how you know which are which in a sector. And who decides what is a Tier 1 vs. a Tier 2? Is it really that concrete or just an individual's perception?

On a related note, does anyone know where I can get lists of stocks in a particular sector? For example, all of the stocks that make up the Brokers (XBD) index. I know a handful but I'd like a comprehensive listing, not only for this index but others. I use RealTick and only have a few indexes I can pull up with lists in a particular sector. If anyone uses RealTick, do you know where I can get more (the .slf files)?

 

http://www.market-topology.com/

http://www.mobydata.com/comp.htm

BTW, anyone know any other historical quote provider than Yahoo? I used their historical quotes for my correlation macro and it is no longer working, I can't seem to find those quotes in spreadsheet format on their web site anymore.

 

TC2000 has eod data that can be imported into excel pretty easily. You can also overlay symbol and index charts. I think it's $30/mo for the end of day data. You can do very detailed scans too.

 

Thanks for the links Hitman.

 

Go to http://www.cboe.com/Home/Default.asp everything you are looking for is there. The sectors and there components and some good info on how sectors work.

 

That market topology site is really amazing, not something I would use for trading in real time except maybe to get some trading ideas on stuff like pairs trading etc. But I did get a really cool-looking wallpaper from there.

Moby data is the best site on indexes I have found so far, unfortunately it's a bit out of date for some of the indexes. That is, it will give you a pretty comprehensive list of indexes, but the components for some of them will have changed since the website was last updated.

I would suggest that once you find an index you are interested in, you use google or some other search engine to find the website of the owner of that index. So go to www.nasdaqtrader.com for nasdaq indexes, the S&P website (www.spglobal.com) for S&P indexes, etc. They will have the latest information on index components, the weightings, base etc.

Besides websites listings such as moby data, another option is to use the search feature of your data provider.

The following applies for Real Tick:

Go to Help, then Symbol Guide. Use the search type 'ticker symbol.' Type $* for pattern and click on search. This will give you a huge list with everything in the Real Tick data base that starts with the '$' sign. This includes all the indexes.

You can narrow this down by using a name search and typing 'index' in the search box. This will not give you the whole list as some indices use abbreviations in the name field.
To get the current list of components find a chain for that index. It would be great if you could simply type $*.ch, but that doesn't work, so you have to use question marks instead (one question mark = one character.) Type $???.ch to get chains with three characters, $?????.ch for five characters and there is also $bio100.ch.

Simply typing 'chain' using a name search won't work as well since not all chains have 'chain' in the company name field.

Now do this: open a market minder, hit F5 (the function key at the top of your keyboard, you can also right click the minder and chose the 'configure column layout' option.) Click on 'more.' This will give you a list of additional columns you can add to the minder. Choose 'Company name,' add it, choose 'Commodity name,' add it. Now make those columns wider.

Now simply drag and drop the chain you have found in symbol search to the market minder. This will fill your market minder with all the components of the index for that chain.

Here is another, perhaps a better way of doing it. Open one more market minder window (so now you have two.) Add the same columns mentioned above.

Right click on one of them choose setup, minder type: standard, load symbols from server: choose Pattern Search on all exchanges and all securities and search for $*

You will have to wait a while, when you see that you are no longer downloading data, scroll down to see the list od symbols starting with $.

This will again give you a huge list of everything that starts with $, but now you can sort this for example according to the Commodity Name field, which will separate the list into different types of symbols (indices, tal chains etc.) Right click on the text 'Commodity Name' and chose sort ascending. There will be a lot of symbols and this will mess up the market minder (it will not display the first few hundred symbols.) You will have to switch to 'sort descending' and go to the bottom to get that first few hundred symbols.

To get a shorter list, right click again, setup, clear the list of symbols and load a new list this time narrowing the type of securities to either chains or indices. I believe that will list all of them. If that's true, then the previous search for everything starting with $ gave you both indices, chains, and stuff you don't need such as $TIME and other Real Tick system variables.

Again, whenever you find a chain you like, drag and drop it into the second minder to get the current list of the index components.

You can also go to Favorites/Market Minder/ Index Component Chains to get a complete list of index component chains, but this will obviously not give you indices.

voodoo

 

One more thing. When you go to Yahoo Finance, and click on Symbol Lookup, then choose alphabetical listing, you will have the option to view sector/industry listings.

I think companies are listed in a particular sector according to some wall street standard. Does anyone remember what organization sets these standards and compiles the official lists?

voodoo