Indicator That Blew Away the Market in 2015 Signals 'Buy' Again

When Profitable Trading developed a new indicator based on momentum two years ago, we knew it'd be good. After all, we had spent hundreds of hours backtesting it. 

So it wasn't shocking when it was a success right out of the gate.

From the day we first revealed it to a small group of traders, it has beaten the market time and again, delivering gains of:

-- 23% in two months
-- 57% in six months
-- 114% in eight months
-- 242% in 12 months

And many more.

Using this indicator, we've been able to identify, and recommend to readers, some of 2015's biggest winners. By March of this year, eight stocks it tagged as "buys" had already soared between 20% and 50% -- while the market had gained just 2%. 

Throughout 2015, it delivered winners of 47%... 55%... 60%... and 88%.

What's the secret?

Well, one thing that makes this indicator unique is that it doesn't rely on just one technical or fundamental tool to identify potential winners.

Instead, this indicator is derived by combining two of the market's most effective "triggers" -- a technical trigger and a fundamental trigger.

The technical indicator, or "Trigger #1," has been proven to beat the market by traders and academics alike. You might be familiar with it; it's called relative strength, or simply RS.

RS assigns a numerical score from 0 to 100 to a stock based on its price performance relative to other stocks in the market. This gives you a way to quantify the strength of a stock's performance in the recent past, which often is a harbinger for how it is likely to perform going forward.

Because stocks that are outperforming their market peers tend to continue to outperform over the next few months, and sometimes over years, a high RS is an essential component when identifying big potential winners.

But relative strength is only half the story. 

While Trigger #1 helps us find stocks likely to move higher, "Trigger #2" ensures the underlying company has solid financials, as well as enough resources to keep its business growing.

Taken together, these two triggers add up to a combined score that can range from 0 to 200. The higher the number, the more likely the stock will continue to outperform in our experience.

For example, consider Post Holdings (NYSE: POST), a stock with a sky-high score of 185. 

Post Holdings has been around for more than 100 years, surviving two world wars and numerous recessions and depressions. 

It's a household name with a list of popular brands that include Grape-Nuts, Honeycomb, Fruity Pebbles, Shredded Wheat, Alpha Bits and Honey Bunches of Oats, among many others.

When it comes to industry stalwarts like POST, you don't usually get quick gains. But this stock has strong fundamentals and technicals in its corner, plus the weight of hedge fund manager and billionaire John Paulson's conviction behind it. 

The company has posted strong earnings and sales growth in recent quarters and is up almost 70% in the past 12 months. 

POST

But it's not too late to purchase shares for yourself. Our indicator continues to flash a "buy" for POST. 

In fact, POST is No. 4 on the just-released list of the "Top 10 Picks for 2016" based on this indicator, which has already tagged more than 100 winners in just two years for gains of up to 242%.

If you want to learn more about the indicator and how to get all of its "Top 10 Picks for 2016," I invite you to read our new report.

It will only be available for a few days, so if you have any interest in reading it, click here now.

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