Advisors know it intuitively: all stocks are not created equal, even those that look very similar on the surface. Yet, figuring out which to hold out of an ever-expanding assortment is a challenge. Enter an ideal solution: Nasdaq Dorsey Wright’s Technical Attribute Stock Ranking System.
Over its substantial history, Nasdaq Dorsey Wright has created many innovative technical indicators based on Point and Figure charting. One of their best is the “Technical Attribute” ranking, which applies a 0-5 score for every stock (5 being best) based on compiling multiple factors, such as relative strength versus the S&P 500 and relative strength versus an equal weighted index of the stock’s sector, among others. In total, each stock has five scored attributes, including two vs. the market and two vs. the sector, with one additional absolute attribute (trend). The best stocks succeed in all five measures.
Nasdaq Dorsey Wright has done extensive testing on the effectiveness of the system, and over multiple decades, high-scoring stocks have been proven to outperform lower-ranking stocks. The point of the Technical Attribute Stock Ranking System is to help advisors choose the best stocks they can, especially when making an intra-sector choice or picking between a few seemingly similar funds. By seeing which fund holds the highest concentration of 5s, advisors can be confident in the potential for outperformance.