JPMorgan Gains New AI Trading Edge – Here’s How to Level the Playing Field

By TradeSmith Editorial Staff

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Everyone is expecting the Federal Reserve to raise interest rates today.

That’s essentially a given.

But it’s what comes next that matters.

And some very smart folks are putting artificial intelligence (AI) to work —scrutinizing what the Fed says — to find that moneymaking edge.

JPMorgan Chase & Co. (JPM) has created an AI language model called the Hawk-Dove Score to decipher and rate the tone of policy signals.

The banking giant found that when the model detected an increase in hawkish tones from Fed speakers between FOMC meetings, the next monetary policy statement was also hawkish, with yields on one-year Treasury bills going up.

The takeaway: This AI model can “read” Fed sentiment, analyze it, and start executing trades based on how dovish or hawkish those statements are. And it can do this in mere seconds.

But JPMorgan isn’t the only company using AI to gain an investing edge.

We have a staff of 36 data scientists, software engineers, and investment analysts developing our market algorithms. Our team literally has hundreds of years of collective experience in the fields of software development and data science.

And what’s even more important is that we designed our services so that anyone can assess an investment at a glance; you don’t have to create your own codes or algorithms, or stare at screens all day.

Essentially, all you need to do is type in a stock’s ticker, and you’ll know immediately what to make of an investment opportunity.

Ahead of the Fed’s decision today, I want to share a few of our tools to show how, no matter what happens, our algorithms are constantly deciphering new information and data to bring you investable opportunities.

The four tools listed below are just a sample of what we have to offer, but again, I want to give you a taste of how easy they are to integrate into your decision-making process.

Note: The information shared below reflects the most recent data at the time of writing. Some data and figures may have changed since.

Health Indicator and Entry Signals

The Health Indicator is designed to give you a quick measure of the current performance trend for a given position. Based on this indicator, you may decide whether to buy (Green Zone), hold (Yellow Zone), or sell (Red Zone) a particular stock.

In our Red Light, Green Light series, we share stocks that recently were stopped out or triggered an Entry Signal, giving you a list of companies to consider avoiding or investing in.

As an example, we’re seeing more gold, silver, and natural resource stocks enter the Green Zone as gold prices have gone up roughly 10% over the last year and have crested the $2,000-an-ounce level.

Endeavour Mining (EDVMF), a gold mine operator in West Africa, triggered an Entry Signal on April 25. Through stock buybacks and dividend payouts in 2022, Endeavour has shown it’s a company that makes shareholder-friendly moves:

EDVMF is up over 18% so far in 2023 and is expected to report earnings on May 4.

Money Movers

There are a lot of reasons to sell a stock, but there’s only one real reason to buy: You think it will go up in price.

And our Money Movers tool, which tracks the buying and selling of insider investors, is a great way to gauge the sentiment surrounding a stock.

One company it recently highlighted is Bassett Furniture Industries Inc. (BSET), a furniture retailer and manufacturer. Over the last few years, Bassett has faced a backlog of orders and high raw material costs as a result of pandemic-related pressures.

The BSET stock price has been beat down over the last year, dropping 15%.

But the company said in a March 30 press release that “the turmoil caused by pandemic supply chain upheaval is now behind us.”

If money is any indication — and it is — insiders have felt BSET has been a strong buy over the last few years.

The early buying activity in the second quarter shows that those statements about leaving pandemic problems in the past aren’t just lip service:

The statements the company has made, paired with this buying activity, make it a stock worth adding to a watchlist.

Volatility Quotient

This tool tells you the risk levels associated with any given investment. And when you know your personal risk tolerance, using the VQ can help you feel more comfortable with your investment decisions because you can limit investing in anything that exceeds your tolerance.

Let’s say you wanted to start investing in AI stocks.

Two that our system has flagged as strong investments are Microsoft Corp. (MSFT) and Nvidia Corp. (NVDA).

Each is in our Green Zone, each has a great Business Quality Score, and each is in an uptrend. But using our VQ, we can see which AI stock is a better option for a risk-averse investor.

Microsoft is considered a medium-risk investment, with a VQ of 23.23%. (The lower the VQ, the lower the associated risk.)

Nvidia is considered a high-risk investment, with a VQ of 42.25%.

Again, our tools highlight both companies as strong investments at the moment, but MSFT poses less risk and would be a better fit for a risk-averse investor.

Meanwhile, NVDA would be suitable for an investor who is comfortable taking on more risk in pursuit of larger returns.

Predictive Alpha

Powered by our AI and machine-learning program called An-E, it was designed to provide price forecasts for virtually any stock on the S&P 500, as well as many other popular ETFs and funds.

One example I want to highlight is Avita Medical Corp. (RCEL), a biotech company with an innovative product that harnesses the regenerative properties of a patient’s own skin.

You can think of it like “spray-on-skin” for the treatment of burns.

On April 28, RCEL closed at $15.52 per share.

And as you can see in the image below, An-E found that this was a stock to get bullish on in the weeks ahead:

It projected that by May 29, RCEL would trade for $16.34 per share.

But it didn’t stop there…

The beauty of An-E is that it is always learning to provide the most accurate predictions possible.

When RCEL closed on May 1 at $15.66 per share, An-E upped its price prediction to $16.55 for May 30.