The Bottom Line:
- Vector Vest’s ‘Money Machine’ search reveals 8 stocks with strong fundamentals, including high relative value, relative safety, and sales growth outpacing earnings growth.
- The ‘Money Makers’ search, pre-built into Vector Vest, identifies stocks with high relative safety, good volume, and buy recommendations.
- Both searches help users find stocks with good upside potential and the ability to withstand price declines.
- Two portfolios, ‘VV Money Machine’ and ‘Money Makers’, have been created to track the performance of the stocks identified by these searches.
- Proper trade management, such as using trailing stops or the ‘Star Search’ tool, is crucial for protecting profits and minimizing risk.
VectorVest’s Money Machine Search: Uncovering Strong Fundamentals
Uncovering Stocks with Strong Fundamentals
The VectorVest Money Machine search is designed to uncover stocks with strong fundamentals that have the potential to generate significant returns. This search looks for stocks with a 5-day moving average of RTE above 40, indicating a positive trigger in the timing of the move. Additionally, the search requires a Comfort Index greater than 1.25, which means the stocks have a higher ability to withstand lengthy price declines and are less volatile compared to other stocks.
Key Criteria for the Money Machine Search
The Money Machine search also focuses on stocks with a price greater than $1, an average volume greater than 100,000 shares, and double-digit earnings growth. The search requires the earnings per share to be greater than zero, ensuring positive earnings, and the sales growth to be greater than 10%. By targeting mid-cap stocks with a market cap less than $10 billion and sorting by RV (Relative Value) and RT (Relative Timing), the search identifies stocks with good upside potential that tend to go up more than they go down.
Managing Trades and Setting Stops
Once the stocks are identified using the Money Machine search, it’s crucial to manage the trades effectively. VectorVest’s Star Search tool helps in this regard. When a stock is in the fast lane, it indicates a strong upward trend. However, if the stock moves into the middle lane, it may be a signal to either take half of the position off the table or exit the trade entirely, especially if the stock is considered overpriced. Setting trailing stops, such as a 15% trailing stop, can help protect profits and limit potential losses. By monitoring these stocks daily and using the Star Search tool, traders can make informed decisions on when to enter and exit positions.
Money Makers Search: Pre-Built for High Potential Stocks
Focusing on Robust Sales and Earnings Growth
The Money Makers search places a strong emphasis on companies with robust sales and earnings growth. By requiring sales growth to outpace earnings growth, the search ensures that the companies have a solid foundation to support their earnings. For example, one of the stocks identified by the search has a sales growth of 38% and an earnings growth of 30%. This indicates that the company is generating sufficient sales to maintain and potentially expand its earnings in the future.
Analyzing the Stock Charts
Analyzing the stock charts of the companies identified by the Money Makers search provides valuable insights into their performance and potential entry points. The video highlights several stocks, such as TLS, CAMT, ADMA, and BMA, and examines their charts in relation to the NPI (New Price Index). By looking for breakouts above resistance levels and considering the overall trend, traders can make informed decisions about when to enter a position. For instance, with BMA, the video suggests waiting for the stock to break above the resistance level of $68.15 before considering an entry, as this would indicate a stronger bullish momentum.
Adapting to Market Conditions
While the Money Makers search identifies stocks with strong fundamentals and upside potential, it’s crucial to adapt to market conditions and manage risk accordingly. The video emphasizes the importance of setting stops to protect against potential losses, even if a stock appears to be a strong candidate. By using trailing stops or monitoring the stock’s position in relation to the Star Search lanes, traders can make informed decisions about when to take profits or exit a position. This adaptability allows traders to capitalize on opportunities while mitigating risk in various market conditions.
Combining Searches for Maximum Upside and Minimal Risk
Combining the Power of Money Machine and Money Makers Searches
By utilizing both the Money Machine and Money Makers searches in VectorVest, traders can identify stocks with strong fundamentals and high potential for generating significant returns. The Money Machine search focuses on stocks with a combination of positive timing triggers, low volatility, and double-digit earnings and sales growth. On the other hand, the Money Makers search is a pre-built search within VectorVest that targets stocks with a relative safety greater than one, sufficient trading volume, and a buy recommendation.
Monitoring and Managing Positions
Once the stocks are identified using these searches, it’s essential to monitor and manage the positions effectively. VectorVest provides tools like the Star Search, which helps traders determine when a stock is in the fast lane (indicating a strong upward trend) or in the middle lane (suggesting a potential exit point). By setting trailing stops, such as a 15% trailing stop, traders can protect their profits and limit potential losses. Additionally, regularly reviewing the stock charts and considering factors like resistance levels and overall trend can help make informed decisions about entry and exit points.
Adapting to Market Conditions and Risk Management
While the Money Machine and Money Makers searches provide a solid foundation for identifying promising stocks, it’s crucial to adapt to market conditions and manage risk accordingly. The video emphasizes the importance of setting stops and being prepared to take profits or exit positions when necessary, even if a stock appears to be a strong candidate. By monitoring the stocks’ positions in relation to the Star Search lanes and considering other market factors, traders can make informed decisions that align with their risk tolerance and investment goals. Ultimately, combining the power of these searches with effective risk management and adaptability can help traders navigate various market conditions and potentially generate significant returns.
Tracking Performance with VV Money Machine and Money Makers Portfolios
Tracking Performance with the VV Money Machine Portfolio
To demonstrate the effectiveness of the Money Machine search, a portfolio called the “VV Money Machine” was created on the day the video was recorded. The portfolio consists of the eight stocks identified by the search, and a trailing 15% stop was set for each position. On the first day, the portfolio was already up 2.10%, showcasing the potential of these carefully selected stocks. Traders can choose to set the trailing stop and let it manage the positions automatically or monitor the stocks daily using the Star Search tool and manually adjust their positions based on the stock’s movement between the fast and middle lanes.
Tracking Performance with the Money Makers Portfolio
Similar to the VV Money Machine portfolio, a “Money Makers” portfolio was created to track the performance of the stocks identified by the pre-built Money Makers search in VectorVest. The video creator cherry-picked the top five stocks from the search results, which included well-known names like Nvidia, Arista Networks, Applied Materials, Synopsis, and Cadence. These stocks were chosen based on their strong fundamentals, such as impressive sales growth compared to earnings growth. By monitoring the performance of this portfolio, traders can gauge the effectiveness of the Money Makers search in identifying stocks with high potential returns.
Adapting Stop Criteria for the Money Makers Portfolio
Since the Money Makers search specifically targets stocks with a buy recommendation, the video creator suggests adjusting the stop criteria for the Money Makers portfolio. Instead of using a trailing stop, the creator recommends setting the stop criteria to “recommendation not equal to buy.” This means that if a stock’s recommendation changes from a buy to a hold, it would trigger an exit from the position, allowing traders to lock in profits. By adapting the stop criteria to align with the search’s focus on buy recommendations, traders can effectively manage their positions and minimize potential losses.
Protecting Profits and Managing Risk with Proper Trade Strategies
Implementing Trailing Stops and Monitoring Positions
To protect profits and manage risk, it’s crucial to implement trailing stops when trading the stocks identified by the Money Machine and Money Makers searches. The video creator suggests using a 15% trailing stop for the VV Money Machine portfolio, which can be set and left to manage the positions automatically. Alternatively, traders can monitor the stocks daily using the Star Search tool and manually adjust their positions based on the stock’s movement between the fast and middle lanes. By actively managing positions and adhering to a strict stop-loss strategy, traders can minimize potential losses and lock in profits when necessary.
Adapting to Changing Market Conditions
While the Money Machine and Money Makers searches provide a solid foundation for identifying promising stocks, it’s essential to remain adaptable to changing market conditions. The video creator emphasizes the importance of regularly reviewing the stock charts and considering factors such as resistance levels, overall trend, and potential overbought conditions. By staying vigilant and adjusting trading strategies accordingly, traders can navigate various market scenarios and make informed decisions about entry and exit points. This adaptability allows traders to capitalize on opportunities while mitigating risk in different market environments.
Leveraging VectorVest’s Tools for Effective Trade Management
VectorVest offers a range of powerful tools that can aid traders in effectively managing their positions and protecting profits. The Star Search tool, for example, provides valuable insights into a stock’s momentum and helps traders determine when to enter or exit a position based on its location in the fast or middle lanes. Additionally, the ability to set custom stop criteria, such as the “recommendation not equal to buy” for the Money Makers portfolio, allows traders to align their risk management strategy with the specific criteria used in the stock selection process. By leveraging these tools and features, traders can make data-driven decisions and implement robust risk management techniques to optimize their trading performance.
