In the past couple of weeks, we’ve been looking at the fast growing field of mobile phone apps for the financial markets.
In the coming weeks, we will dig into the inner workings of half a dozen or more stock market apps that are available for the iPhone/iPad/iTouch. With a user base of over 100,000,000, the iPhone is the logical place to start our smart phone app review. We’ll cover the Android platform in a subsequent series of reviews.
In our last article, we looked at a breakthrough app that offers professional level stock analysis on a smart phone. The Chaikin Power Tools app doesn’t just monitor your portfolio or draw charts, it actually produces a buy, sell or hold conclusion by using a decision algorithm based on portfolio level testing. It passed rigorous third party testing to prove that it provides statistically significant outperformance of the market.
A Model that Works
While the Chaikin Power Tools app is visually appealing, when you look under the hood, you quickly find the beauty is more than skin deep. The app ranks almost any stock you enter on a five point scale:
• Very Bearish (lowest rating) • Bearish • Neutral (medium) • Bullish • Very Bullish (highest rating)
This rating is driven by a well-tested and well thought out analytical model. It is based on a 20-variable model that captures the best indicators from fundamental, technical and sentiment analysis.
The apps originator, Marc Chaikin, based the indicator set on 40 years of Wall Street experience and almost as impressively on exhaustive testing. While writing this article I spoke with Marc who said his team considered hundreds of characteristics but eliminated any indicator that didn’t add value. Marc said that many traditional Wall Street standards, like trailing 12 month earnings, didn’t test well.
After the rigorous examination, the framework that was left impressively outperformed the S&P 500 and the Russell 2000 in a statistically significant, proprietary analysis by a third-party .
The app breaks 20 variables into four rating areas and the strength of each area displays on main app page for any stock chosen. In the image below, you can see the overall ranking (Bullish or fourth higher on a scale of five) and the four categories for the underlying metrics: Financial Metrics, Earnings Performance, Price/Volume Activity and Expert Opinion.
By clicking on any one of the four categories listed above, you can see the five sub-factors that drive the rating in that area. Below is an example of Price/Volume Activity Rating, which is another way to say the technical analysis of the stock.
Here you see the key factors for the technical picture of the stock. I have written previously about Chaikin Money Flow and the Chaikin Oscillator—common indicators in my tool kit and ubiquitous in almost any reputable charting package. If you’d like more information on this useful indicator, go to stockcharts.com and look under the Chart School tab. Stockcharts.com’s Chart School is another great no-cost resource!
The other three areas have the same level of detail and contain fundamental data and a section on sentiment analysis (dubbed Expert Opinions in the app).
Test Drive This App
As a reader of Tharp’s Thoughts, you can be one of the first to try out the app. As I said in the last article, this app is brand new. During the initial launch phase, it doesn’t cost anything. Get it for free while you can! If you have an iPhone, an iPad or an iTouch, go to the Apple App Store and search for “Chaikin”—you’ll find it there. The app has only been available for a couple of weeks, so you’ll be one of the first to give it a test drive. The app has already been featured in Barron’s “Electronic Investor” section and was the topic of a front-page article in the Philadelphia Inquirer business section this past Thursday. Now you too can be on the leading edge of apps for your phone!
I’m anxious to hear what you think about the app as an analysis tool. And knowing the quality of the researchers that read this newsletter, I’m sure you’ll be finding more ways to use this rich tool than I can imagine.
I’ve known Marc for over a decade and some time back, he asked me to look at an early prototype of the app. It simply blew me away. Even in preliminary testing, I was completely impressed with what it offered traders.
In full disclosure, I am an early and very minor investor in the project. To paraphrase famed Remington razor company owner Victor Kiam from his advertising, “I liked it so much I invested in the company.”
[Publishers Note: This tool has not been endorsed by Van Tharp or The Van Tharp Institute. The five point stock scale is unrelated to Van Tharp’s market types. Neither Van Tharp nor the Van Tharp Institute have any involvement, financial or otherwise, with Chaikin Power Tools or its publisher.]
Next week we’ll look at a couple of apps that have some very useful characteristics (like real time data and visually appealing charts).
Great Trading, D. R.
About the Author: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena. He is a regularly featured guest on both Report on Business TV, and WTOP News Radio in Washington, D.C., and has been a guest on Bloomberg Radio. His articles have appeared on SmartMoney.com and Financial Advisor magazine. You may contact D.R. at the Dr Van Tharp International Institute of Trading Mastery.