Results leverage – Simon Brown

Njabulo asked me to write about some basic fundamentals, which on the surface may seem odd for a trader. Trading is very much about price action, ignoring fundamentals. But equally price action is about getting the wind at your back, or a collection of small breezes that add up to a strong wind at your back.

For example, RSI rising, volume rising and a breakout. Each individually is a potential trade, but collectively they’re a stronger signal.

We can do the same with fundamentals. Long strong fundamentals and short weak fundamentals – using price action to trigger entries.

Keeping it simple would be to use the results leverage we see in most Clicks results.

Results leverage is when revenue is up and HEPS is up by a larger percentage and the dividend an even larger percentage. This shows not only a strong management team but also a company that is continually able to squeeze out more profit on the same revenue and equally using less cash.

Finding these companies with positive results leverage and add them to a watch list waiting for a price buy trigger. Inversely add those weak or negative results leverage to a watch list waiting for a short signal. It’ll add some breeze to your trading back and help boost your overall win rate.

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