How the Power Gauge Rating Is Calculated

An overview of the 20 factors within the Power Gauge Rating

 

Stock Ratings in the Power Gauge

 

The Chaikin Power Gauge Rating is a powerful stock rating system that combines 20 key factors into a single, color-coded score. This score helps forecast whether a stock is likely to outperform or underperform the market over the next 1 to 6 months.

Unlike traditional ratings that rely only on fundamentals or chart patterns, the Power Gauge blends fundamental, technical, and sentiment-based insights—providing a more complete picture for investors.

 


 

Overview of the Calculation Process

The Power Gauge Rating is calculated in four steps:

  • Score each of the 20 factors based on how a stock ranks within its group
  • Apply proprietary weightings to create a raw score
  • Group raw scores into rating categories (Very Bullish to Very Bearish)
  • Apply a technical overlay to account for current trend behavior

Let’s walk through each step—and then break down all 20 factors.

 


 

Step 1: Scoring the Factors

Each of the 20 factors begins with real-world data (like earnings growth or insider activity). That data is:

  • Normalized to make it comparable across different companies
  • Ranked from 1 to 100, based on the stock’s industry group or the Russell 3000

These ranked scores form the foundation of the Power Gauge.

 


 

Step 2: Weighting the Components

The 20 factors are grouped into four components, each with its own weight in the model:

  • Financials
  • Earnings
  • Technicals
  • Expert Sentiment

Factors with higher predictive value carry more weight in the calculation. This creates a raw Power Gauge score.

 


 

Step 3: Assigning the Rating

The raw score is then placed into one of seven equally sized groups (called septiles) to produce a final rating:

Raw Score Group Displayed Rating
Top 14% Very Bullish
Next 28% Bullish
Middle 28% Neutral
Next 14% Bearish
Bottom 14% Very Bearish

This system keeps the ratings balanced, while still being responsive to major market shifts.

 


 

Step 4: Technical Overlay (Neutral+ / Neutral–)

Finally, a technical overlay adjusts the displayed rating based on how the stock is performing compared to its long-term trend (a proprietary version of the 200-day moving average):

  • Neutral+: A Bullish or Very Bullish stock that has closed below its long-term trend
  • Neutral–: A Bearish or Very Bearish stock that has closed above its long-term trend

These temporary adjustments help the rating stay in sync with what the stock is actually doing—especially during volatile periods.

📘 To learn more about how these adjustments work, see:
What Do Neutral+ and Neutral– Mean?

📈 Want to see the trend line? The long-term trend (a proprietary version of the 200-day average) is visible as an blue line on the Chaikin chart.
Learn more in: How to Read the Chaikin Chart

 


 

The 20 Factors in the Power Gauge

Below is a breakdown of all 20 factors, organized by their component group:

🧾 Financials

These factors evaluate the company’s financial strength and stability.

Factor Description
Long-Term Debt to Equity Compares a company’s long-term debt to its equity. Lower values generally indicate stronger balance sheet health.
Price to Book Compares the stock price to the company’s book value (net assets).
Return on Equity Measures how effectively the company uses shareholder equity to generate profits.
Price to Sales Compares the company’s market price to its total revenue.
Free Cash Flow Represents how much cash the company has available after expenses and capital investments.

📊 Earnings

These factors reflect past earnings performance and expectations for future growth.

Factor Description
Earnings Growth Measures the company’s earnings growth over a 3–5 year period.
Earnings Surprise Tracks whether actual earnings beat or missed analyst forecasts.
Earnings Trend Shows whether earnings have been rising, falling, or stable over the past year.
Projected P/E Compares the current stock price to projected earnings for the upcoming fiscal year.
Earnings Consistency Reflects how steady and predictable the company’s earnings have been over time.

📈 Technicals

These factors assess the stock’s price and volume behavior.

Factor Description
Relative Strength vs. Market Measures the stock’s performance compared to the S&P 500 over 6 months.
Chaikin Money Flow Indicates buying or selling pressure based on price and volume patterns.
Price Strength Measures how far the current price is from its long-term average.
Price Trend (Rate of Change) Tracks the speed and direction of price movement over 42 days.
Volume Trend Compares short-term trading volume to longer-term averages to assess momentum.

👥 Expert Sentiment

These factors reflect the views and behavior of analysts, insiders, and other market participants.

Factor Description
Estimate Trend Shows how analysts’ earnings estimates have changed in the past 13 weeks.
Short Interest Measures how many shares have been sold short, indicating negative sentiment.
Insider Activity Tracks buying or selling activity by company insiders over the past 6 months.
Analyst Rating Trend Reflects recent changes in analyst recommendations (e.g., upgrades/downgrades).
Industry Relative Strength Compares the stock’s industry performance to the broader market.

 

Other Notes

  • The Power Gauge is calculated daily for stocks with at least 1 year of trading history and earnings data
  • Stocks with limited history (like recent IPOs) may not have a rating
  • ETF ratings are calculated separately and use different logic

 

 

 

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