Stack Your Signals: A Smarter Way to Spot Winning Trades
In my last column, I talked about different trading strategies – from day trading to forever investing (à la Warren Buffett) – and many more in between.
The same is true of indicators. Some are fundamental, like valuation. Others are technical, like Bollinger Bands, or based on market action, like market breadth or my friend Jason Bodner’s Big Money Index data.
I often get questions from TradeSmith Insiders: Which indicator(s) should I pay the most attention to?
My answer: All of them!
Now, I’m not trying to be a wisecracker here … although my wife might disagree.
I’m simply trying to point out an approach to trading and investing that has served me well for many decades and could work for you too.
At its core, it’s a weight-of-the-evidence approach, and its foundation has two key elements:
- Trusting proven data is a heck of a lot more effective than following your gut instincts…
- And there’s no such thing as the “holy grail” … no indicator works all the time.
If you can get your head around these two key truths, then your investment process should be a whole lot easier.
The truth is, there is no single “best” indicator. Many of our proprietary TradeSmith indicators and signals are based on completely different data inputs. That’s why when more than one indicator flashes positive, it’s another key piece of evidence that helps you see the big picture more clearly.
Let me give you an example:
My colleague Louis Navellier is a quant like me. Back when I was just starting out in the business in the 1980s, Louie was already a legend. And I read and reread every issue of his MPT Review newsletter.
His claim to fame is the proprietary Stock Grader System he developed, which helped him earn the #1 ranked model portfolio from 1985 to 2005, according to The Hulbert Financial Digest.
The analytics that go into it are part fundamental, part technical, and entirely proprietary. And year after year, his system has proven very effective at helping Louie and his readers find many top-performing stocks – often before making their biggest moves.
Subscribers to any of Louie’s research get full access to his Stock Grader System on TradeSmith Finance.
Note: If you have Ideas by TradeSmith, Trade360, or a Platinum membership, you can access his proven data in our Screener as well. If you don’t see this feature on your screener – and would like to – simply call our Customer Care team at 866-220-1107 to learn more.
So, I combined Louie’s proven Stock Grader data with other TradeSmith filters to find promising stocks using a weight-of-the evidence approach.
Specifically, I combined our TradeSmith Bollinger Bands Strategy (detailed in a recent column here) to help me uncover temporarily oversold stocks that may be poised for an upside reversal.
Next, I added Louis Navellier’s Total Stock Grade into the screener, which distills his quantitative and fundamental data analysis into a single letter-grade – from A to F.
Spot Overlapping Winners
Here are a few simple steps to follow in setting up this screen:
- First, click on the Invest tab, then select Screener on the submenu.
- Next, click on Filters,to add the filter for TradeSmith Strategies, scroll down to Platinum, and select Bollinger Bands. This will find all the stocks that currently qualify for this strategy.
- Then after clicking Filters again, under Louis Navellier Proprietary Grades, check Louis Navellier’s Total Grade. I set the filter to A-very strong and B-strong, to focus only on his top stock selections from the dropdown menu.
When I ran this simple screen yesterday, I found 10 overlapping results – stocks that were both oversold (per TradeSmith’s Bollinger Bands strategy) and also made the grade … literally with Louis’ Stock Grader system (strongest quant and fundamental grades).
Pathward Financial (CASH),shown above, caught my eye right away due to its high free cash flow yield (FCF). It’s also in our TradeSmith Health Indictor Green Zone and has a solid Business Quality Score (BQS).
Plus, our proprietary Trade Cycles Seasonality data is displayed in the column next to Louie’s Total Grade. Although I didn’t include TradeSmith Seasonality filters in this screen, you could easily add them.
By adding Seasonality Patterns as a display column, I can quickly scan the icons to check for any bullish seasonal patterns coming up among the stock results.
And sure enough, CASH has several double-digit seasonal patterns overlapping right now and extending into June and July, as you can see below.
Mike Burnick’s Bottom Line: Which TradeSmith Indicators should you pay the most attention to? All of them! For my money, it’s best to use a weight-of-the-evidence approach – mixing and matching different technical, fundamental, and proprietary indicators that have proven effective over time – can give you a lot more confidence in a potential winning trade idea.
Good investing,
Mike Burnick
Senior Analyst, TradeSmith
P.S. Blending TradeSmith strategies – like our proprietary Bollinger Brands signal – with Louis Navellier’s powerful Stock Grader system can help identify high-potential stocks.
But success in this market isn’t about chasing every hot tip – it’s about combining proven tools and long-term insight to find opportunities others may miss.
And Louis has spent nearly five decades mastering his quantitative approach to stock selection. It’s helped him uncover some of the market’s biggest winners – well before Wall Street caught on. In fact, his system has flagged more than 175 stocks that went on to soar 1,000% or more.
And yesterday, during his highly anticipated Liberation Day 2.0 Summit, Louis pulled back the curtain on what he believes is the biggest profit opportunity of the next decade.
According to Louis, Trump’s $10 trillion economic blueprint – unfolding right now – could unleash a tidal wave of capital into three key areas: Tax cuts, tech innovation, and energy independence.
During the event, Louis shared the names and tickers of several high-conviction plays –including an A-rated stock he believes could double or triple in the months ahead.
If you missed the live broadcast, don’t worry. A full replay is now available – but it may only be up for a limited time.