The Five Step Funnel

Our five-step process begins with a thorough review of the broad market environment. The broader market represents the tide and we want to be swimming with the tide, not against it.

There are three big questions to answer:

1. Are we in a bull or bear market environment?
2. Which market cap groups are leading (large, mid, small, micro)?
3. Which styles are leading (momentum/growth or low volatility/value)?

The answer to these three questions tells us if we are in a broad bull market that benefits momentum or if we are in a narrow bull market that requires more selectivity.

Once the broad market environment is established, we then turn to industry groups. In particular, we want to focus on the strongest industry groups, and to some extent the strongest sectors. After the broad market environment, industry group performance is the second biggest influence on a stock’s performance. Estimates vary, but research shows that industry group performance accounts for around 37% of an individual stock’s performance and sector performance accounts for 12%. We want to find the hottest industry groups to capitalize on this influence.

The answer to these three questions tells us if we are in a broad bull market that benefits momentum or if we are in a narrow bull market that requires more selectivity.

Once the broad market environment is established, we then turn to industry groups. In particular, we want to focus on the strongest industry groups, and to some extent the strongest sectors. After the broad market environment, industry group performance is the second biggest influence on a stock’s performance. Estimates vary, but research shows that industry group performance accounts for around 37% of an individual stock’s performance and sector performance accounts for 12%. We want to find the hottest industry groups to capitalize on this influence.

A good article to further explain this concept can be found here: https://www.investors.com/how-to-invest/investors-corner/understanding-the-link-between-industry-groups-and-institutional-investors/

With the strongest industry groups narrowing the funnel, we then turn to the price characteristics for each stock. First and foremost, we apply trend filters and analysis to make sure the stock’s price is trending higher. Perhaps the easiest way to avoid losing money is to avoid stocks that are trending lower. Focusing on stocks in uptrends is the best way to increase the odds of a successful trade or investment.

At this point, the remaining stocks have passed through three funnels and it is time to start ranking by performance. This is where momentum and relative strength come into play.

Momentum often works best in broad bull markets when the tide is lifting most boats. Relative strength techniques often work better in selective bull markets. Either way, we want to focus on stocks that are in uptrends and that show some sort of leadership.

The final step is good old fashioned chart analysis. At this stage, we know the broad market environment and have a robust watch list featuring strong stocks from strong industry groups. We then hand pick two stocks each week that show promising technical setups and look poised to continue their uptrend. The key word here is “continue”. We are not looking for trend reversals. Instead, we are respecting the trend and looking for it to continue.

This funnels the market down to 2 top candidates that possess the characteristics needed to outpace the markets.

With Stock Pick Pros, Members Receive:

• Two highly curated picks per week.
• Delivered via email and/or text message
• Follow up for seven days

Each Pick Includes:

• Name, sector, industry group, market cap, average volume
• A description of the business with fundamental insights
• Detailed trend analysis
• Key support levels to watch
• Initial price targets
• Initial stop-loss
• A strategy to employ going forward such as a trailing stop

Mary Ellen and Art have been applying this process to their own work for over 20 years. Widely followed by professional and self-directed investors, their expertise has helped investors successfully navigate the markets through many market types.  Using proven techniques that have been time tested, these experts are opening a door into their systematic approach to uncovering timely stock candidates.

Come join an elite group of traders who can now have access to the top picks from two top expert!