Trade Ideas SCoRe vs. IBD Smart Select CR

The Trade Ideas’ SCoRE (Stock Composite Rating) is a proprietary formula that measures a stock’s strength along technical, fundamental, and non-structured dimensions.  We employ over 17 metrics to measure each SCoRe. A stock can have a SCoRe range of 30 to 100. Unlike the other rating systems which publish weekly or daily, the SCoRe is dynamic, and will change in real-time during live market hours.  Although SCoRe incorporates several fundamental metrics, because of the emphasis placed on momentum capacity measured in days and weeks, technical parameters play a key role in determining the rating. Fundamentals might be good at finding intrinsic value, but the many professional traders employed at Trade Ideas understand that for the most part, fundamentals are backward-looking, and technical metrics are better at gauging a stocks true strength or weakness and lead to better decision-making.  We therefore use price relative to many long term moving averages, position in long term range filters, moving average crossovers, and more to measure a stock’s strength/weakness against potential volatile market conditions.

IBD’s Smart Select CR (Composite Rating) is a proprietary rating system that is more fundamentally based which rate stocks from 1 to 99.  CR uses the a collection parameters which include: Earnings Per Share (EPS) with an emphasis on profit growth over the last two quarters, relative technical strength compared to other stocks over the last 12 months, sales growth, profit margins, and return on equity.  Smart Select CR also incorporates accumulation/distribution metrics and relative strength compared to others in the same industry. Because of its emphasis on fundamental data and little to no exposure to technical metrics, IBD’s ratings are less likely to fluctuate from day to day and consider changes to market in a timely manner.

Trade Ideas’ SCoRe combines shorter time frames metrics with longer ones to assure that any price fluctuation on any time frame can cause a change in the stock’s rating.  Consequently, SCoRe’s real-time component makes it an accurate forecaster of present and shorter time frames. This is very important, especially to traders/investors that may not have a good grasp of reading charts, understanding technical analysis, or inexperienced at handling market volatility.

Here is a great example:

On Nov 5, IBD had a Smart Select CR on the symbol HIIQ of 99 (the highest rating a stock can have).  You can see on the chart below that on this date, HIIQ was on its second day of intense selling, but it maintained its high Smart Select CR.

As you can see in the Trade Ideas’ Top-list (Scan) below, on Nov 1st, just 2 trading days before the selloff commenced in HIIQ, Trade Ideas had a SCoRe of 83.

Just 2 days later, the SCoRe had dropped to 64 by the end of the trading day.  And keep in mind, this almost 20 point drop reflected in the SCoRe in REAL-TIME, adjusting lower throughout the trading day as the stock plummeted.

In summary, IBD Smart Select CR is a good tool for finding value and opportunity based on previous performance found in the company’s recent earnings report, relative strength, and previous period metrics discussed above.  This predominately fundamental model might have advantages when it comes to investing or trading in longer timeframes but be subject to less accuracy as a result. Due to the lack of technical metrics on multiple time frames, this approach lacks the ability to inform, in a timely manner, an internals break down of a stock’s technicals.  

Conversely, Trade Ideas SCoRe strength lies in its real-time component and the implementation of many technical metrics (both short and long term timeframes).  It also includes important fundamental metrics such as EPS, revenue growth, cash to debt ratio, and even some social media stuff. The SCoRe is second to none when it comes to quickly evaluating a stock’s strength/weakness because of its sensitivity to all time frames.  It can be useful on all time frames and is definitely superior when evaluating a stocks potential on shorter timeframes (day trading, swing trading).

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