Practical Examples

Stable Stocks, Commodities & Forex

To illustrate just how Channalyze can spot the best investment opportunities, the following is a list of securities with Stable Cycles (produced 24th November, 2008). All of these securities are available from data in the downloads page. This list will be updated on a frequent basis.

From the SP500 folder

Abbot Laboratories, Aon, Baker-Hughes, Campbell Soup, Chevron Texaco, Consolidated Edison, Devon Energy Corp, Fedex, General Mills, Hercules Incorporated, Key Corp, Kimberley Clark, Kroger, McDonalds, Occidental, PG & E Corporation, Progress Energy, Raytheon, Rowan Companies, Sempra Energy, Southern Company, Vulcan Materials, Xcel Energy.

From the FTSE100 Folder

Astrazeneca, Autonomy, Bae Systems, British American Tobacco, Cable and Wireless, Lloyds TSB, Wm Morison, Pearson, Standard Life, Wolseley.

From the Toronto Folder

Agnico-Eagle Mines, Ballard Power Systems, Canadian Utilities, Eldorado Gold, Enbridge, EnCana Corp, Fronteer Dev Corp, Inter Pipeline Fund, InterOil Corp, Northbridge Financial, Northland Power Income Fund, Power Corp of Canada, Rogers Communications, Royal bank of Canada, Telus, TriStar Oil and Gas.

From the Forex Folder

British pound/Canadian dollar, New Zealand dollar/UK pound.


Using Channalyze

The analysis of cycles in market data using Channalyze will show that each security will have its own characteristic cycles. It will also show that cycles are constantly fluctuating in wavelength, amplitude and phase – the latter is a measure of the position of a cycle relative to some fixed point in time. Thus cycles can be seen to be unstable over an extended period of time. However, cycles will remain stable for a short period of time during which three or four complete  sweeps of the cycle will be traversed. Channalyze takes advantage of this fact by isolating such cycles. The stable cycles will then be summed in order to provide a view of the movement  of the security over the immediate future.

It is important to understand that only a small percentage of securities, say 10%, will be passing through a stable period in which the future movement can be predicted.

Stage 1

The first step therefore is to allow Channalyze to scan through all the securities in a folder (in these examples, this was done on the SP500 stocks on the 1st November). Once the scan is complete the sums of stable cycles so produced for each security must be examined sequentially. The method of isolation means that the cycles terminate some distance in the past – the greater the wavelength, the further back in time the cut-off point.  Channalyze extrapolates the cycle sum up to the present time and into the near future. Since we have the actual movement of the security itself available from this cut-off point to the present , this provides an essential check as to whether the extrapolation is correct up to the present. If it is not, then the extrapolation into the future is also not correct, and the security does no need to be examined any further.

An example of such invalid extrapolation is shown for Fedex. In order to show up the movement of the stock itself, a 9-point centered average has been superimposed (green). The true cycle sum is shown in blue, and the extrapolated sum in red. Thus, until mid-September, the cycle sum was a good representation of the stock price movement. However from that point onwards, the cycle sum did not predict the rapid fall in stock price suffered by world markets.

By contrast, the next chart is that of the cycle sum of the Southern Company, and shows an excellent correlation between the two.

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In order to get a better view of the extrapolated portion of the chart, it is expanded in the next chart. The close correlation between the two is remarkable.

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By this method, a short list can be established of those securities which have been predictable up to the present time.

Step 2

Attention now has to turn to the distribution of cycles in those securities which have survived Stage 1. The cycle distribution of the Southern Company shows the type of distribution which we should be looking for. There are just three main groups of cycles and they are quite well spaced. By contrast, the distribution we do not want to see is that shown for Kimberley Clark – a large number of cycles spread out across a large wavelength range.

Note that the distribution chart allows a group of cycles to be summed and plotted – a very useful feature for examining the group independently of the total sum. Thus for the Southern Company. A plot obtained by clicking on the Sum Blue button gives the plot shown, in which this group of cycles has just bottomed out. It is this group of cycles which are the major influence on the total cycle sum which it is anticipated will sweep the stock price upwards.

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So there you have it - the proof of concept for Channalyze (it works!). Why not try downloading the trial today?

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