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By Michael Salvatore, Editor, TradeSmith Daily

In This Digest:

So much is possible with the TradeSmith Screener
Why Unity Software (U) is such a strong trade right now
How to screen for the top seasonal patterns
A big call options setup in a quality discretionary stock
Lesser-known stocks climb the Quantum Score leaderboard

Ask me what my favorite TradeSmith tool is, and every time it’s the Screener…

We revamped our Screener software earlier this year with an enhanced interface.

It was my favorite TradeSmith software before the upgrade, and it’s even more my favorite now.

Not only is the Screener a robust tool for finding stocks based on key fundamental and technical metrics – set as narrow or as broad as you like…

The really cool thing is how all our other software tools plug in to it. Based on what tools you subscribe to under TradeSmith, the Screener’s functionality grows and grows.

You can start with all the traditional metrics you learned about in Finance 101… then add on our proprietary software tools, strategies, and signals.

Developing, refining, and educating our readers is the foundation of TradeSmith. Our entire team is dedicated to the mission of empowering you with innovative ways to trade the market.

And as a TradeSmith analyst, I’m extremely fortunate to have access to the entire TradeSmith catalog – just like our valued Platinum subscribers.

Because of that, I can create some unique views on the market.

Today, I’d like to share some of them with you… and help out a subscriber who has a particular question about how to use this powerful software.

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First up, a pro tip for my fellow swing traders out there…

Swing trading is the idea of trading stocks or options over a period of a few days to a few weeks. Outside the constant pruning of my long-term portfolio, it’s how I like to make my bones and get my kicks.

If you’re going to swing trade, I highly recommend using this filter set. It only returns stocks that:

Are U.S. stocks ranging from mid-caps ($2 billion-$10 billion) all the way up to mega caps ($200 billion+)…
Are above $10 per share, weeding out the penny names that tend to lack institutional interest…
Have a daily trading volume of more than 1,000,000 shares – another measure of solid liquidity…
And have gone up at least 35% in the last year, keeping us in the stocks with the best recent momentum.

This combination of liquidity, momentum, and accessibility is what you want in a swing trade. These are the stocks that are generally primed to move… and move quick.

That’s just step one. Anyone with access to the Screener by way of Trade360, for example, can access these filters.

Trade360 also gets you a great market dashboard, perfect for the Mega Melt-Up situation Keith briefed you on in this webinar.

Where it gets really fun is when you start bringing in other TradeSmith tools.

Take Predictive Alpha, for example. That’s our AI-based algorithm that forecasts what your stock will do next and tells you how accurate that same pattern has been in the past.

It’s the perfect companion to a swing trader looking for short-term gains like 21.9% on Verint Systems (VRNT), 7% on Diageo (DEO), and 26.5% on SemTech (SMTC).

Now, we could go to dozens of asset details pages and check the Predictive Alpha projection for stocks like those…

Or we could save a ton of time and set up a Screener for it.

On top of what I shared above, we can add a few filters from Predictive Alpha to really narrow down the list of opportunities:

We want stocks that are Correlated – meaning the stock’s Predictive Alpha Projection and its Trend Zone (a measure of short-term momentum) are moving in the same direction.
We want stocks with a Prime Projection move of at least 4%. (If you’re bearish, you can set this to -4%… or any other number you like.)
We want stocks with a historical Target Accuracy of more than 75% – meaning the stock has hit its projected target in 3 out of every 4 projections or better.
Finally, to keep our options open, we’ll look for 21-day windows – the maximum amount of time Predictive Alpha makes projections.

This filter set returns 27 stocks. Here are the top 5, sorted by Historical Accuracy:

Let’s zoom in on 3D development software company Unity Software (U), with its 91.4% historical Target Accuracy.

Let’s check out U’s Predictive Alpha page:

U is projected to rise nearly 6% over the next 21 days – and it’s backed by a 91.4% historical Target Accuracy.

Predictive Alpha Options members can take it a step further with the Options tab.

That algorithm looks at each stock’s individual volatility to determine the best options trade to make. In this case, with a lower VolScore (lower volatility), the primary trade is to buy call options, with the secondary trade to sell put options:

Predictive Alpha Options users can then click the Find Options link on the right and find a few ideas for both strategies. But we’ll save that for our paid-up readers.

Hopefully you can see why I love the Screener…

Once you understand how to use it, it becomes the gateway to the rest of the TradeSmith ecosystem.

It seamlessly links up with all our other software products, letting you construct the kinds of trades you want to make and use our software in the way that best fits your investing style.

On that note, here’s an email I received on this very same point…

Is it possible to create a Seasonality Screener that identifies high projected increase for stocks/options along with a high Accuracy Rate?

Thank you,

– John

Hey John, thank YOU so much for writing in. Your email inspired this whole issue of TradeSmith Daily.

You can absolutely use Screener with our Seasonality software.

Let’s go back and adjust what we built earlier to get what you’re looking for – a high Accuracy Rate and a strong seasonal pattern. Here’s the filter set that gets us stocks like this (then we can work our way to options):

This returns 16 stocks with seasonality patterns set to start in the next 7 days, with a win rate of more than 80%, and with an average return of more than 5%.

Browsing the patterns, Royal Caribbean Cruises (RCL) stands out. That stock has gone up 14 of the last 15 years from Aug. 27 to Nov. 15, for an average return of more than 18%:

Now, when it comes to trading options, we don’t currently have any seasonality filters that are related to options. We love the idea, though. And we should note that our Seasonal Edge strategy – part of Trade Cycles – automatically selects options trades based on the best seasonal windows.

If you wanted to take advantage of the RCL trade above, your first instinct might be to go looking for an at-the-money call expiring sometime after the end of the Seasonality period. Currently, that’s all the way out to the December monthly expiration – so you’d be paying a hefty premium to buy it now ($27.55 or $2,755 per contract as I write.)

There is a nice shorter-term seasonal trend through Sept. 14 that could be worth trading on that month’s expiration, instead. The seasonal pattern from Aug. 27 through that date is for a 6.8% gain, and RCL has been higher in that time for 13 of the last 15 years – still pretty good odds.

So let’s say you go out of the money with the $350 strike, representing a gain of just a bit more than the 6.8% seasonal trend. There you’re paying $4.65 per contract – easier to stomach. And if the trade works out, you can turn around and do it again for that second seasonal run through mid-November.

I hope this all was helpful in showing you not just how to use our Screener, but also how to construct trades from what you find there. And I’ll pass along that idea of seasonality-based options screens to our dev team.

Finally, let’s look at some good longer-term buys…

The last couple weeks have been all about the Quantum Score here at TradeSmith. And if you’re familiar with the Quantum Score, you’ll know why we feature it every chance we get.

Its creator Jason Bodner, formerly a senior derivatives trader on Wall Street, spent years isolating the top qualities that attract Big Money.

Those turned out to be fundamental factors like revenue, earnings, and profit margin growth… alongside technical momentum and large-scale buying pressure.

That combination made all the difference for Jason’s trades. And today we use them to rank a stock from 0-100, where a higher Quantum Score makes it more statistically likely that stock will outperform.

A backtest from 1990 through 2023 found that holding the top Quantum Score stocks on a six-month rotation resulted in outperformance of more than 5x the S&P 500.

Without further ado, here are the top 10 Quantum Score stocks in our data right now… accessible to all of Jason’s subscribers on the TradeSmith Finance Dashboard.

I’ve seen stocks like Palantir (PLTR), Cal-Maine Foods (CALM), Talen Energy (TLN), and WisdomTree (WT) grace the list many times before. But it’s always the lesser-known names that catch my eye.

Stonex Group (SNEX), Brookfield Asset Management (BAM), and Paymentus Holdings (PAY) certainly fit that mold.

I’ll keep you posted on these rankings here in the Digest… so stay tuned.

But outside of those, you can access all Quantum Scores as a Quantum Edge Pro subscriber. Click here to learn more about what Jason does, along with how you can access his exclusive model portfolio and score any stock on your watchlist.

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