Three Beats, Three Tools, and a Feast of Trade Ideas

By Michael Salvatore, Editor, TradeSmith Daily

In This Digest:

NVDA’s earnings report surprises to the upside
The top three AI-powered trades to watch today
Three “convergence” trade setups from our master trader
The top three stocks in Jason Bodner’s crosshairs
And one big reason to get involved in commodities now

AI bulls breathed a sigh of relief yesterday…

If we had to put the last few weeks of the AI megatrend into one word, that word is “doubt.”

Calls of “circular financing” between chipmakers, hyperscalers, and AI software makers. Major pullouts by the likes of Japanese mega hedge fund SoftBank and Silicon Valley kingmaker Peter Thiel. Pearl clutching about mountains of AI spending with an unclear path to a return on investment.

You’ve heard it all.

And as today’s price action shows us, these doubts still persist. An overnight rally of 2% in the tech-heavy Nasdaq 100 gave way to a big swing downward, placing the index at the lows of the month.

Doubts or not, it’s hard to take issue with AI chipmaker Nvidia’s (NVDA) earnings report.

Every earnings report is loaded with stats to digest. But here are the most important three big beats from Nvidia:

Last quarter’s datacenter revenue, making up close to 90% of Nvidia’s overall revenue, came in at $51.2 billion against estimates of $49.3 billion.
NVDA raised fourth-quarter revenue estimates to $66.3 billion from $63.7 billion. The Street was expecting a lowered guide to $62 billion.
Earnings per share – a key measure of profitability – of $1.30 against estimates of $1.25.

The one number Nvidia didn’t beat was its gross profit margin. That came in 73.4% against an average estimate of about 74% – a slight miss in a sea of beats and guides higher.

NVDA traded about 4% higher in aftermarket trading yesterday following the news.

Earlier today, though, that gain has reversed with the stock down 1% at writing.

As we’ve discussed, NVDA has a monumental weighting in the S&P 500. It makes up about a record 7% of the benchmark.

NVDA is like a blue whale breaching from the ocean’s surface. When it makes a big move, no matter which way, the tunas and the mackerels of the stock market have almost no choice but to follow.

But as today’s price action shows, even the most influential earnings reports do not make a market.

So today, let’s think about where we can put money to work. And I promise it’ll be a feast for your mind.

Let’s rapid-fire through three investment ideas, each across three key TradeSmith tools: Predictive Alpha, master trader Jeff Clark’s Convergence screener, and Jason Bodner’s Quantum Score.

Then I’ll give you three reasons why it’s not too late to get into the critical commodities that make the AI boom possible.

First up is our AI-powered trading model, Predictive Alpha…

Have you heard about the large language model that powers chatbots like ChatGPT?

Those use AI to try to guess the next word in a sequence with varying complexity.

You can think of Predictive Alpha as a large numbers model. It uses AI to guess the next number in a sequence. And we’ve trained it on the thousands of stocks we track in our system to make forecasts on their price.

Some stocks are relatively easy to forecast, and that’s reflected in a high historical Accuracy Rating. So the best-of-the-best Predictive Alpha trades are those with a high projected gain and a strong track record.

I ran a screen for stocks in the S&P 500, the tech-filled Nasdaq 100, and the Dow and sorted them by historical accuracy. Here are the top three in our system right now:

1. Teradyne (TER)

Testing equipment and robotics company Teradyne (TER) is projected to rise 3.2% over the next 21 trading days, with the forecast ending Dec. 18. Projections for this stock have been accurate 93% of the time in the past.

2. Albemarle (ALB)

Lithium producer Albemarle (ALB) is projected to rise 8.7% over the next 14 trading days, with the forecast ending Dec. 9. Projections for this stock have been accurate 90% of the time in the past.

3. Caterpillar (CAT)

Construction equipment giant Caterpillar (CAT) is projected to rise 3.6% over the next 14 trading days, with the forecast ending Dec. 9. Projections for this stock have been accurate 86% of the time in the past.

If stocks are going to recover from the early November rout over the next couple of weeks, these trades are ones to look at seriously. All of them have projected returns far higher than what you’d expect from holding the broad markets, and all have a strong historical backing for hitting those forecasts.

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Now, let's turn to another quantitative approach…

Chances are high you’ve heard the name Jeff Clark before. But just in case you haven’t, here’s why you should get to know him.

Over his more than 40 years as a trader, he’s developed a reputation for knowing when stocks are about to make big moves.

He called the 1987 crash, the dot-com bust in 2000, the 2008 financial crisis, and the 2022 tech meltdown. And through them all, he used a concept called “mean reversion.”

Mean reversion is the idea that a stock’s price tends to drift back toward its “normal” (average) level after moving too far in either direction. Traders like Jeff watch for moments when a price swings well above or below that norm, betting it will snap back like a stretched rubber band.

Earlier this year, Jeff partnered with TradeSmith to bring his unique trading expertise to our readers. And among the first projects we worked on was to take his mean reversion strategy and quantify it.

And when we did, we found that we could also find the opposite condition – when stocks are so stuck close to the mean that the next likely move is a big shot away from it.

Jeff uses a mix of three dynamic trendlines to measure whether stocks are overstretched to the upside or downside… or trading in a tight range and building up energy.

The former type, what we call Convergence trades, can be great ideas to follow right ahead of a major market breakout.

And that’s what TradeSmith’s Convergence screener helps you find. It scans the market for the stocks with the tightest trading ranges, prime to explode higher once they break out.

Here are the top three Convergence trades in our system right now. All of them have been trading sideways in the recent volatility, building up energy for an explosive move:

1. Norfolk Southern (NSC)

2. Public Service Enterprise Group (PEG)

3. Delta Air Lines (DAL)

Note that all these stocks have been in an uptrend for most or all of 2025. That gives the edge for their next move to be higher. And the pent-up energy in all these stocks suggests that move could be big.

Finally, let’s look at the best-of-the-best Quantum Edge stocks…

Jason is our in-house expert on institutional money flows and leads our growth-focused research service, Quantum Edge Pro.

After spending more than a decade executing trades for elite investors at Cantor Fitzgerald, he developed a strategy that pinpoints high-growth companies seeing unusually large levels of institutional buying activity.

He turned this experience into a quantitative stock rating system: the Quantum Score.

Jason Bodner’s Quantum Score ranks stocks on a 0-100 scale based on three Power Factors:

Earnings, revenue, and profit margin growth.
Technical price momentum
Unusually strong buying volumes – those you tend to see from Wall Street institutions.

The higher the Quantum Edge Score, the better the stock. In Jason’s research, he’s found about a nine-month hold time is best.

And his track record supports this approach, with current gains in the model portfolio of 186% on Celestica (CLS), 104% on Carpenter Technology (CRS), and 142% on Super Micro Computer (SMCI). Our overall backtesting shows the Quantum Edge system outperformed the S&P 500 by 5-to-1 since 1990.

So applying that Quantum Edge score, here are the three top-ranked stocks across the S&P 500, Nasdaq 100, and Dow Jones Industrial Average:

1. Eli Lilly & Co (LLY)

All these stocks have sterling fundamentals, strong price momentum, and the telltale signs of institutional buying…

But LLY is the absolute best – defying a warning signal for the rest of the Health Care sector from here, as my colleague Lucas Downey also featured yesterday.

2. Monster Beverage (MNST)

Like Eli Lilly, this very different company has a perfect technical score in Jason’s system, revealing the right blend of price momentum and Big Money involvement. Fundamentals are also stellar, at 91.4 out of 100:

3. Alphabet (GOOGL)

Google needs no further introduction, but its Quantum Scores aren’t always this high. Not only does it have excellent fundamentals, scoring 91.4 there, the technical score is also strong, at 93.4:

The feast of ideas is not over yet…

You’re going to want to save room for dessert.

This week in TradeSmith Daily, we’ve been showing you that participating in the AI trend is not simply about owning tech stocks that may or may not be relevant in the future.

It’s just as important – maybe even more so – to own key commodities stocks.

The truth hidden in the dark corners of the AI trend is that this technology is built on materials dug out of the ground. Think lithium, gold, silver, copper, zinc, and rare-earth elements.

The White House gets this. That’s why it’s been busy grabbing up stakes of companies like MP Materials (MP), which gained 95% after their purchase… Lithium Americas (LAC), which gained 76%… and Trilogy Metals (TMQ), up 103%.

And one man – Rick Rule – understands it even better than them.

Rick Rule is widely regarded as one of the most accomplished resource investors alive.

Across five decades in the sector, he has identified and financed multiple ventures that went on to deliver 100x–1,000x returns, including standout wins like Lumina Copper, Pan American Silver, and uranium giant Paladin. He also participated early in Franco-Nevada—now legendary for its 124,000% ascent.

Rule’s influence extends far beyond individual stock picks. He is a rare investor whose success enabled him to found his own bank. And his unmatched industry Rolodex—built from decades navigating the Vancouver resource scene—gives him direct access to the sector’s most important contacts.

Long story short, Rick Rule knows resources. He knows which ones are in short supply and which are in abundance. He knows which companies have the best access to them. And he knows which ones the White House is targeting right now.

So it should be no surprise why 8,638 investors recently showed up to hear Rick Rule’s big idea about which resource stocks the White House could buy next.

I would urge you not to miss Rick’s presentation. Whether or not you decide to join up with him and get his best picks, his presentation is chock full of valuable insights about this little-understood aspect of the AI trade.

Three Beats, Three Tools, and a Feast of Trade Ideas