In the simplest terms, technical attributes are our stock ratings. We call them technical attributes because they are based on the characteristics we believe are indicative of a strong stock from a technical analysis perspective. A stock's technical attribute rating appears at the top of the stock's chart page and functions as our way of summarizing the strength of that stock based on trend and Relative Strength measures to easily identify stocks with a positive technical outlook.
Technical attribute ratings are a 5 point scale from 0 to 5. Stocks rated 0 being the weakest and stocks rated 5 being the strongest. We might equate our scoring system to the familiar buy, hold, and sell terminology by saying that stocks rated 4 or 5 are in our buy range, stocks rated 3 are holds, and anything below a 3 is considered to have a sell rating. We simply give stocks a rating based on the technical measures we have deemed to be important to help us determine what to buy for our portfolio and what to sell from our portfolio.
The purpose of our technical attribute ratings is to essentially create a checklist of key technical measures based on our point & figure charting to summarize what a stock’s charts are telling you without actually needing to dig into the charts yourself. In fact, we think you can understand and implement the ratings without knowing how to read a Point & Figure charts at all. The score simply acts as a means for leveraging our expertise via an easily understood rating system.
Technical attributes are made up of trend, market Relative Strength, and peer Relative Strength measures and help us answer the following the following 3 questions:
Is this stock headed in the right direction? (Trend)
Is this stock stronger than the average stock in the market? (Market Relative Strength)
Is this stock stronger than the average stock in its sector? (Peer Relative Strength)
Technical Attribute Components
Technical attribute ratings are based on the concepts of trend, market Relative Strength, and peer Relative Strength with each Relative Strength category broken down further into both long term and intermediate term relative strength. The 5 components that make up the technical attribute rating are as follows:
Trend, market Relative Strength signal, market Relative Strength column, peer Relative Strength signal, peer Relative Strength column. Each component is simply worth one point towards the total rating. Either the stock satisfies the criteria and receives a point, or it does not and receives no points for that component.
One of the great things about our technical attribute ratings is that it is no secret how they are calculated. There are only 5 variables, they each make up 1 of the potential 5 points, and each is easily identified and understood using Point & Figure charts.
Trend
Trend is something we pay particularly close attention to and consider to be among the most important indicators of a security’s technical strength. Trend lines on a security’s chart help us determine the overall direction of that security. First and foremost, we want to make sure a security is on the right track in order to invest in it.
A stock trading in a positive trend will receive one point toward it’s technical attribute score. While a stock trading in a negative trend will receive 0 points toward its Technical attribute score.
Market Relative Strength
In any investment process, one of the primary goals is to outperform the benchmark in order to justify the cost of managing the portfolio instead of simply buying the index. This is why we include market relative strength as one of the core components of our stock ratings. Our goal is to identify stocks that have demonstrated the ability to outperform the market over time.
When we compare a stock to a broad market benchmark on a relative strength basis, we are trying to determine if that stock is strong enough to warrant the single stock risk going forward. If not, it may make more sense to instead simply own the index or search for other stocks within the index that might be worth the single stock risk going forward.
When we talk about a stock’s Market Relative Strength, the benchmark we are comparing it to is the S&P 500 equal weighted index. We use the Equal Weighted index because the goal is to determine a stock’s relationship to the average stock in the market, and using a market cap weighted would obscure this by giving much more weight to the largest stocks in the index.
Market Relative Strength Signal
The most recent signal formed by a stock's market Relative Strength chart tells us if the stock is currently exhibiting long-term strength or weakness vs. the overall market.
Market Relative Strength Column
The stock's current column (furthest right on the chart) on its market Relative Strength chart tells us if the stock is currently exhibiting intermediate-term strength or weakness vs. the overall market.
Peer Relative Strength
The final components of our technical attribute ratings are related to peer relative strength, which considers a stock’s relationship to the other stocks in its sector. At the core of all of our relative strength analysis is the search for leadership. In order to consider a stock worth buying, we want to know that it is a leader among the members of its sector. In our opinion, if a stock has not demonstrated leadership among the stocks in its sector, it is likely there are currently stronger options for gaining exposure to that sector.
To determine a stock’s Peer Relative Strength, we compare it to an equal weighted index of the stock’s in the same sector. Just like with the market relative strength comparison we use the Equal Weighted index so we can determine a stock’s relationship to the average stock in its sector rather than giving more weight to the largest stocks in the sector.
Peer Relative Strength Signal
The most recent signal formed by a stock's peer Relative Strength chart tells us if the stock is currently exhibiting long-term strength or weakness vs. its sector.
Peer Relative Strength Column
The stock's current column (furthest right on the chart) on its peer Relative Strength chart tells us if the stock is currently exhibiting intermediate-term strength or weakness vs. its sector.
Technical Attributes on the Chart Page
Beside the stock's technical attribute rating, each of the score components are listed with checkmarks indicating the positive attributes contributing to that stock's rating.
To view detailed history of a stock's technical attribute rating, click the "Tech Attribute" box just below the number.