Trade Alert: Four Ways To Buy A Broadening Rally
Independent screens surfaced opportunities in semiconductors, defense, banking, and fintech.
Looking Beyond The Obvious Leaders
Tuesday night’s screens widened the opportunity set beyond the obvious AI leaders. They surfaced a regional bank after a strong quarter, a semiconductor-equipment company rebounding from a sharp pullback, a European defense-electronics contractor ahead of earnings, and a profitable fintech consolidating after a deep correction.
Screening For Rebounding AI-Adjacent Names
The semiconductor-equipment name comes from a new screen we developed over the weekend, and detailed in our “When To Get Back In Memory Stocks” post.
We call that screen “AI Profitable Recovery” (we have a separate one for speculative AI-adjacent names that aren’t currently profitable), and consists of these criteria:
U.S. listing and listed options.
ChartMill Setup Rating of at least 5 (a 0-to-10 measure of entry and exit quality).
ChartMill Relative Strength (CRS) of at least 50 (performance versus the rest of the market).
A price above the 5-day moving average and a rising 200-day moving average.
A rising 14-day RSI between 30 and 50.
A ChartMill Health Rating of at least 5.
A next-fiscal-year revenue estimate that is unchanged or higher over the previous month.
Screening For Strong Fundamentals And Setups
The bank comes from our “Really Time To Buy?” screen. That one includes these strict criteria:
U.S. listed and listed options.
Chartmill Setup Rating of at least 7.
Chartmill Technical Rating of at least 6.
Piotroski F-Score of at least 8.
PEG ratio (trailing 5 years and next year) less than or equal to 1.
That bank also just reported $0.54 in earnings per share, up from $0.45 a year ago. The defense contractor announced an order for more than 50,000 thermal cameras and reports next week. The fintech carries an 8/10 Chartmill fundamental rating.
The signals came independently. The European defense contractor appeared in our main Trend & Consolidation screen, and the fintech came from our 7777 screen that requires ratings of 7 or higher for profitability, growth, health, and valuation.
Their Relative Strength Index (RSI) readings range from 50 to 56—a constructive middle band that leaves room for the underlying catalysts to work.
Matching The Structure To The Setup
We’re using three different options structures across these four names, applying the most appropriate one to each.
We priced each package with Black-Scholes, Bjerksund–Stensland, and CRR/binomial models, then set our alert entry prices at or better than the most conservative fair value. That discipline gives us room to participate without turning a good setup into a bad entry.
Full details, easily actionable, are below, including our pre-set exit orders, so we can profitably exit these trades automatically if the underlying stocks go our way.
Today’s “Really Time To Buy?” Trade
Regional banking / improving-profitability theme
RSI: 53; Chartmill Technical Rating: 7; Setup Rating: 8; Fundamental Rating: 4.
