Over the years I have probably been asked that question more than any other question by far. First, over the same 45 years I have not found any single buy indicator that works every time. I do have a list of my 6 favorites, all of which I have set up on my Barchart Custom Views. I have found that the more of my criteria a stock meets the more likely it is to beat the averages. Here is my list of criteria and the order in which I like to use them:
Weighted Alpha - Investors and analysts use weighted alpha to measure stock price movements over the course of (typically) one year. The values are weighted to emphasize more recent price swings over less recent ones. The premise behind the weighted alpha metric is that a fluctuation in an asset's price becomes less important as time moves on. The formula for weighted alpha is essentially a modified version of the traditional alpha from modern portfolio theory.
I try to find stocks that have a higher Weighted Alpha than my benchmark (The Value Line Arithmetic Index)
Barchart Opinion - Overall Average Signal calculated from all 13 Barchart technical buy indicators. Signal Strength is a long-term measurement of the historical strength of the Signal, while Signal Direction is a short-term (3-Day) measurement of the movement of the Signal.
I usually try to find stocks with at least an 80% technical buy signal but occasionally will go down to 72%
50- 100 Day MACD Oscillator - Moving Average Convergence/Divergence (MACD) The MACD is similar in concept to the line oscillator. In fact, the buy/sell indicators are identical. The difference is the MACD uses exponential moving averages versus the simple moving averages used in the line oscillator study.
Its the point where the 50 and 100 day moving averages cross and is a longer term indicator. Overall, this is the trading signal that usually gives the best results
Trend Spotter - TrendSpotter is a computerized trend analysis system, developed by Barchart.com. The system uses a combination of wave theory, market momentum and volatility in an attempt to find a general trend for a specific market. TrendSpotter attempts to cut losers early and let winners run.
A graphical interpretation of TrendSpotter can be viewed using either Interactive or Technical Charts.
- When there is a single dot above the price, this is a resistance point and represents a bearish trend.
- When there is a single dot below the price, this is a support point and represents a bullish trend.
- When there are 2 dots, one above and one below the price, this represents a neutral or hold trend (these are the entry prices to make a new buy or sell trade).
- When a trend EXITS either a bullish or bearish trend, the trend is forced as a neutral trend for at least one day.
Number of new highs in the last month - Simply the number of times in the last that a stock hit a new high ---since there are 20 or 21 trading days each month I like stock that have hit new highs in at least 50% of the current trading session or at least 10
And finally the test where the rubber meets the road: A chart of the 20, 50 and 100 day moving averages with the Trend Spotter. Hopefully, its a stock where the price has a 1 to 1 slope and the price, 20, 50 and 100 Day Moving averages never cross. Today's Chart of Align Technologoy (ALGN) is a good example:
I hope this gives you an idea of how to find great stocks to own that will give your portfolio and better than market return.
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