If investing were a journey, this article is like a specially curated map with the best routes highlighted, helping you avoid pitfalls and sail smoothly towards your goal of financial success.

Imagine you're exploring a vast forest. Amidst the greenery, there are awe-inspiring mountain peaks. Now, think of the journey of stock prices. As they ascend like those peaks, there comes a time when they retreat temporarily before continuing their upward climb.

A short term 12-1m momentum signal

If we were to liken the stock market to a living, breathing entity, this signal would be like a pulse check, providing insights into the current health and trajectory of a stock's movement.

Allow me to illustrate – the Price Index 12m Minus 1m is akin to a snapshot of a stock's vitality, comparing its vigor over the past month to its strength a year ago. However, a new, more refined indicator is now on the horizon.

The ultimate buy the dip signal

Picture a skilled sailor steering through tumultuous waters – this signal acts like a compass, guiding investors towards the opportune moment to dive in and take advantage of stocks that have weathered a temporary storm and are poised for revival.

Our data specialist has recommended a strategic screening process:

• Firstly, identify the 30% of companies with the most robust six-month price momentum. It's akin to selecting the gems that have shimmered the brightest over the past half-year.
• Secondly, from this elite group, pinpoint the 20% of companies with the weakest one-month momentum. These are the ones that have recently stumbled in their price performance.

An intuitive strategy

Imagine a gardener tending to a patch of vibrant flowers. This approach is akin to plucking the most promising blooms after a gentle rain, knowing that they will flourish once again in the sunlight of opportunity.

It's based on the notion that the companies thriving over the past six months are likely to experience a minor setback before resuming their ascent. Hence, seizing the dip serves as a moment akin to a golden planting season, ripe with potential for growth.

Alternative screening method

Just like the diversity of flora in a garden, there are multiple paths to discovering ripe investment opportunities. Another method involves utilizing the 90-day adjusted slope indicator, analogous to identifying stocks with a smoothly rising stock price that hasn't been disrupted by sudden, unpredictable factors.

This method entails cherry-picking the 30% best adjusted slope 90-day companies and subsequently homing in on those with the worst performance in the past month, akin to selecting diamonds amidst a cluster of gems.

A word of caution

Amidst the exhilarating pursuit of opportunity, it's crucial to remember that risk management is like a guiding light, providing direction through the labyrinth of investing. By prudently managing your portfolio, you can empower your ventures to weather storms and bask in the sunshine of financial gains.

Guiding you through the peaks and valleys of investment, your diligent dip-buying analyst

PS To uncover exceptional companies perfectly aligned with your investment aspirations, click here.

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