MarketSmith Performance 90 Day Review
Back in May, we were presented with an opportunity to try out Investors Business Daily’s flagship MarketSmith service. In the interim, we penned a few articles devoted to analyzing various workflow enhancements that the service provides while making money on actual “breakout” trades.
MarketSmith Screens – RS Line New Highs
One feature that we like a lot, especially when markets get a bit extended, is the screen appropriately named RS Line New High in Market Correction.
First, you’ll notice the MarketSmith database of 7,596 stocks is scanned, then filtered for stocks with an EPS rating greater than 80, sporting daily trading volume better than 400,000 shares, with a price greater than $20.00/share. Finally, the screen finds those stocks with RS Line making new highs. Click images to enlarge.
We’re looking for candidates to add to our portfolio that we can hold for long-term gains. In other words, we are not looking for day trades. Stocks making new highs (NH) present an opportunity as it highlights institutional activity. In addition, we talked about new 52 week highs consistently beating new 52 week lows in our daily LIVESTREAM broadcasts.
As a result, this screen gives us a list of 24 stocks to analyze. Shown are the top 10 in alphabetical order. We then look for stocks breaking higher on above average volume.
CTAS Stands Out
Cintas Corporation provides corporate identity uniforms and related business services primarily in North America, Latin America, Europe, and Asia. It operates through Uniform Rental and Facility Services; First Aid and Safety Services; and All Other segments.
In other words, we view CTAS as a barometer of economic activity. If the company reports great sales and earnings, we can assume the economy is improving and the company in kind. Since we know GDP is North of 3%, we can assume CTAS will continue to please investors.
This is something we’ve highlighted in social streams over the past few weeks.
Technically speaking, the stock broke out on above-average volume nearly eclipsing 200%. Since volume precedes price, we will consider CTAS as a potential candidate in the weeks ahead. Price is rising along its inclining 50d moving average.
Note fund positions are increasing (right panel) and analysts estimates are being adjusted higher for 2019 and 2020 (left panel). Basically, we like to say, “institutions have our back.”
- Net income surged more than 130%
- Adjusted earnings came in at $1.77 per share, beating analysts estimates by 0.10.
- Quarterly revenues increased 9.1% year over year to $1,669.6 million
- Organic growth for the reported quarter improved 5.1% year over year
- Gross margin increased to 45.1% from 44.4% in the prior-year quarter.
MarketSmith Recent Winners
Tenet Healthcare (THC) was one of the first candidates we took in the trading room, shortly after starting our review of the MarketSmith service. The stock triggered an alert In late April at 25.34. Twenty-nine (29) trading days later THC achieved a 53.15% gain (25.34 > 38.81) before reversing on lower volume.
Kemet (KEM) was a recent winner. We took profits this week at 29.43 for a 36.88% gain. Our original entry was the 21.50 breakout trigger back in early June.
Note, funds continue to add KEM to their portfolios unabated since Sept-16. We cannot be any more emphatic on how important this one feature is to our workflow. If funds are dropping a stock like a hot potato, why consider it? Its one of the first things we look at after price and RS line strength. KEM passes with flying colors.
Have you considered “funds” adding or “exiting” positions in your stock picking criteria?
We like the KEM long-term and will most likely get back in soon. We systematically lock in gains of more than 20% by scaling out above those levels. We felt the stock was due for a breather as it is far above its 50d. We rang the register at 36.88%. Next.
MarketSmith – Two on Watch This Week
If you’ve been paying attention, you noticed that rails were reporting good sales, earnings, and guidance last week. CSX bolted higher on a good report.
Note rails and related industry group stocks that show up in this MarketSmith screen of Friday’s top performers. And, pay attention to “Volume % Change” as this points to institutions.
ARII reports at the end of the month. The stock broke out on above-average volume. RS Line is rising, estimates are being adjusted higher, funds are adding and it’s in a hot industry group to boot.
While not a guarantee, it is a testament to the MarketSmith screens and features that we find most useful. More importantly, how many stocks can you scan each week for these criteria using your current workflow process. How easy is your process of creating alerts for the stocks on your list? MarketSmith makes this process seamless and efficient.
GBX presents another example as the stock breaks out of a large consolidation on above-average volume. It makes you wonder if institutions are onto something? You bet they are.
Watch rails and supporting stocks in the group.
While the above only touches on a few of our favorite MarketSmith features, you can see how quickly it presents exceptional candidates for us to analyze. The best part is, we get automatic “breakout-alerts” sent to our email and mobile phone as the stocks trigger in real-time, 14 in the past week.
Imagine doing all of this manually, as the stock is breaking out, then having to consider sales earnings and additional criteria discussed herein before making the decision to enter a position. Please shoot me.
With a trading room to run and a membership to support, anything that streamlines our workflow process is something we immediately add to our trader’s toolbox. With nearly 3 months of use, this newest service from Investors Business Daily is something we envision using for a long time to come.
P.S. The author has been an avid reader of IBD since 1986.
Disclosure: As an #ibdpartner, that means my use of investors business daily suite of services is complimentary. I also receive compensation from the company for my technical analysis services.
Disclaimer: Do your Own Research
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