For the past several years a couple of screens have been used to identify stocks that offered the potential for significant market gains.
During 2009 those two screens identified 138 stocks that eventually developed trends for gains of 100% or more from January to December. Those trending stocks represented roughly 10% of the total number of Signals that were generated during the year.
Also identified were an additional 215 stocks that eventually developed trends for gains of 50% or more during the same time period.
Therefore, roughly one of every four stocks that successfully passed through the two screens in 2009 eventually developed trends for gains of 50% or more.
The problem with those enviable results is that not one of those 353 trends was identified before, or even during the evolution of those trends. For investors, that represented the same profit potential as reading one of those charts that lists the best performing stocks for the previous year.
In mid-year 2010 several additional screens were developed that would help investors to identify tomorrow’s winning stocks . . . today.
The Unusual Volume and Institutional Investment screens are still used today to identify stocks with trending potential.
The proxy for institutional investors consists of roughly 40 of the leading institutional investment firms and 40 of the leading hedge funds in the U.S. Included are institutional investors BlackRock, Fidelity and Goldman Sachs. Included in the hedge funds are Citadel, ClearBridge Advisors and Elliott Associates.
These preliminary screens have been taken several steps further.
When any stock has successfully passed through the two primary screens it is added to a moving 12-month database.
Every stock in that database is priced daily to identify stocks that have registered a specified percentage increase in market value, today’s closing price versus previous days’ closing prices.
By identifying stocks with measurable and repetitive daily and weekly percentage increases in closing prices it is possible to capture stocks that offer the potential to evolve into significant upward trends.
All potential Trend candidates are made available when they have been identified after the market closes and before the market opens on the following trading day.