Three Cleanest Buys


By Monish Chhabra ǀ June 28, 2021

What is a clean trade?

Statistically, a clean trade to buy, must have two essential characteristics:

    1. Both its nearer-term and longer-term trends should align with each other; in their direction, as well as their gradient.

    2. The stock must have touched a low on both the nearer-term and longer-term trends, and be convincingly turning upwards.

Among all the sectors and stocks we track globally, following are the 3 cleanest setups to go long. We discuss them in the order of the best returns-for-risk on offer.

First one is the world’s largest maker of premium smartphones and other personal computing devices.

The green band shows the last 2-year trend, while the red band shows the trend since the March-2020 crash. Both the trends are almost completely in sync.

The price has touched the bottom of both trend bands and is now turning back up in a way that is statistically convincing.

If it continues it run upwards to touch the top of the bands, it would mean a gain of +25% to +30% from the current price.

The second company is one of the biggest providers of engineering simulation software.

We see a graph strikingly similar to the one before it; clean nearly parallel red and green bands, price touching the lows, and turning back up.

If this stock continues its latest rally, all the way to the top of the band, that would be a gain of +20% to +25% from the current price.

The third company is one of the strongest players in web security, web performance and edge computing.

This move is the most advanced and confirming among the three above. However, this stock is the most volatile among the lot.

If this current up-trend continues to touch the top of red and green bands, it would imply a gain of +30% to +35% from the current price.

Key points from above:

    1. Despite the regular chatter of the markets being high, many stocks have formed a low recently, and are turning back up convincingly.

    2. The three cleanest, best risk-adjusted trades we find today each indicate potential gains of +20% to +30%.

    3. All three of these are in the global technology sector.

Pick sensibly, size suitably and be balanced.

This write-up is for informational purpose only. It may contain inputs from other sources, but represents only the author’s views and opinions. It is not an offer or solicitation for any service or product. It should not be relied upon, used or construed as recommendation or advice. This report has been prepared in good faith. No representation is made as to the accuracy of the information it contains, nor any commitment to update it.