Revealing It All About My Secret Project - SCOREFASTTM

Apurva Sheth

I have to make a confession. I have been working on a secret project for more than a year.

But I wanted to write to you about it today as my work is over and I am very happy with the results. This project has the potential to generate returns like 50%, 61%, 109% and even higher in a matter of just weeks to a few months.

Before I get into the details, I want to tell you about the idea behind the project.

It all began at the Equitymaster Conference in January 2015. I had just joined Profit Hunter in November 2014. We were invited to speak at the conference for the first time.

My presentation was on technical analysis and to use charts to trade successfully. Technical analysis was a totally new topic for Equitymaster readers. As a bit of an industry insider, I knew how important it was to bust the many myths around this approach to the markets.

The first myth I spoke about was about utility of technical analysis. Most people believe technical analysis is only for day traders. But they're wrong. The fact is that technical analysis was developed long before computers, and it was initially used for medium to long-term investments. But with the advent of fast computers, it can be used across time frames.

It was news to most attendees that technical analysis can be used to trade from a medium to long-term perspective.

I already knew that, in the quest for quicker and bigger commissions, the broking industry has largely neglected longer-term technical analysis. Brokers earn more commissions if people traded frequently. It was never in their interest to tell their clients about medium or long-term trends.

But it was in your interest. All this while, you have missed out lucrative opportunities. So I knew I had to see to it that our readers wouldn't be on the losing end.

That's how work on this project began. My aim was to build a solid process to identify long-term trends in stocks.

You probably know that trends develop across multiple time frames. They can last for a few hours to a couple of months and even years. Most traders apply trend following strategies to trade only from a short-term perspective. They trade trends that last a few minutes to a couple of days.

There is nothing wrong with this, but they miss out loads of lucrative opportunities. Stocks can trend in one direction for far longer than just a few hours or days...but for weeks and months at a stretch. And you can identify these long-term trends and make higher returns.

So after a year of working on this project, I am happy to announce that I have been successful at the task I set out to achieve.

I have built a trading system that aims to identify stocks on the cusp of a major reversal...from down to up.

Getting into stocks that have fallen sharply...and are ready to move up...has two main benefits. One, the downside is limited with beaten-down stocks. Two, you can maximise profit potential by staying in them as long as the uptrend lasts. Our focus is to limit risks but not compromise on rewards. I built the system after studying hundreds of stocks experiencing cyclical up and down trends. And this system has generated returns like 50%, 61%, 109% and even higher returns in a matter of few weeks to few months in the backtests that we have conducted.

Presenting SCOREFASTTM

I call it the SCOREFASTTM system. The name is an acronym for the nine indicators we use to identify stocks on the cusp of a long-term reversal. These indicators help us identify trading opportunities that could generate big returns in a few weeks to a few months...

  1. Stretch Indicator: The stretch indicator tells us how far (in percentage terms) a stock is from its 200-day moving average (DMA). Stocks that have deviated far away from their mean tend to revert to the mean.

  2. Crash or %Drop: The crash indicator tells us how much (in percentage terms) a stock has crashed from its highs. Stocks that have crashed more than 30% are more inclined to move up again.

  3. Oscillators: Oscillators are indicators like Relative Strength Index (RSI), Moving Average Convergence and Divergence (MACD) and Rate of Change (ROC) help identify a shift in momentum from down to up.

  4. Reversal Patterns: A break out from reversal patterns like inverse head and shoulder, double bottom, rounding bottom, and rectangle patterns often confirms a reversal of trend from down to up.

  5. Entry/Exit: We recommend a stock only after it has witnessed a sharp fall and has limited downside. And we exit a stock only when the up move has exhausted.

  6. Fibonacci Retracement: Retracement levels are specific intervals or percentages such as 38.2%, 50%, 61.8%, and 78.6% of the previous move around which the stocks tend to find support or resistance. We look at price action around these levels for identifying an opportunity.

  7. Stock Cycle (Accumulation): The price of every stock moves in a repeating 4-phase cycle: Downtrend-Accumulation-Uptrend-Distribution. We look for stocks that are in the accumulation phase and are ready to move in the uptrend phase.

  8. Support and Resistance: Previous highs and lows act as supports for stocks. So we look for stocks trading near such multi-month support levels.

  9. Time: Stock prices tend to stay in a range for a while before they can move further up. Once the stock has spent adequate time consolidating gains, we can enter for the big upside.

We have launched a new trading service, Peak Profit Alert. And we will be using our proprietary SCOREFASTTM system to make recommendations.

You can click here to know more about the service.

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