Building on the work we did over the last several days where SIA highlighted the benefit of integrating the SIA Sector Scope analysis to identify the strongest areas of the market, today we will take this one step further. To recap, after learning how to use the SIA Sector Scopes with the SIA feature video and then using the skills learned to work through a real-life example of finding the sweet spot of the market, which in yesterday's report was Insurance, today we scoured the SIA Insurance sector report to identify a special stock that might be a potential holding for an advisor's portfolio.
Here, instead of just going to the top position on the list, we instead looked for names that were rising up the ranks within their SIA reports as potential new leaders. Erie Indemnity Company (ERIE) might just fit the bill, as shares have hardly had any pullback in the past month when markets were clobbered. Instead, shares of ERIE have rallied both on an absolute basis as well as on a relative basis. In the attached SIA matrix position chart, we can see that shares of ERIE have once again moved into the SIA-favored zone of the SIA S&P 500 Index report, which for rules-based SIA practitioners is the minimum requirement for holdings within their portfolios.
Reviewing the point-and-figure chart, we find that the share price has fared very well during the latest selloff and has actually rallied, albeit mildly. Here, we find resistance now at the $547.18 level, while support is at the 3-box reversal level of $414.70, with more tightly packed support at $406.56, while even more support is viable at $375.60. Taken together, this may extrapolate out to a very good risk-reward ratio, given the tight support and resistance levels. Recall now that this is in the context of a sector that is SIA-ranked as favored within the SIA Sector report.
In the second chart presented, we have assembled a weekly candlestick chart for the last several years, which shows an organized, positively trending equity position with support at the $400 level and the little black arrow highlighting the potential breakout. Also highlighted is the red resistance line at $540, which for now might serve as bookends for the near-term trading range. A break above this level would necessitate further technical analysis. Finally, we have highlighted in green the sssst SMAX score, which currently sits at 10 out of 10, as a near-term indicator of more relative strength, this time against a basket of alternative asset classes.
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