As a retailer that targets a rural lifestyle niche, Tractor Supply Co. (TSCO) isn’t exactly a household name.

But with a footprint spanning over 2,000 stores across 49 states, that niche made TSCO $14 billion in sales last year.

Despite the success, the stock has been trading sideways for over a year. Since testing the $240 level at the end of 2021, the stock has unsuccessfully attempted to breakout to new highs.

However, recent signs show the stock could be awakening from its slumber to make a big move higher.

And it’s being driven by something I call an alpha edge. It’s a key element of successful trading that many tend to overlook in their process.

Powering a Trading Advantage

When traders believe a stock is about to move higher, they try to stack the odds as much as they can in their favor.

So, we start and end our analyses with the technicals. But you shouldn’t forget to put the fundamentals on your side as well.

And that’s where my alpha edge comes in…

Instead of combing through financial statements, broker reports, and other mountains of data – a computer algorithm does all the heavy lifting.

It’s a scoring system that uses dozens of factors such as profitability, earnings quality, and analyst revisions to reveal stocks with the right traits to outperform.

For example, it factors return on equity to show which companies are generating the best profits relative to shareholder capital. Or it highlights companies seeing a rapid increase in future profit estimates by Wall Street analysts.

By targeting factors that have historically delivered outperformance, I can quickly narrow the market’s next big winners out of a universe spanning thousands of stocks.

In fact, since 2010, the top ranked stocks have returned 17% every year. That compares to 10% for the broad market index.

Now here’s why my alpha edge is putting TSCO on my radar…

Watching for Breakaway Momentum

TSCO currently generates an alpha edge rank of 92 (with 100 being the best score). This rank is driven by profitability, quality, and growth metrics.

Once the score shows which stocks have the greatest potential to move higher, the next step is to look for signs of breakaway momentum.

And that’s exactly what I’m starting to see with TSCO. Take a look at the chart below…

Recently, TSCO traded back to the $240 price resistance at point ‘A.’ Then it spent the next several weeks in a shallow pullback.

But notice how that pullback was much smaller than the ones preceding it (red dashed lines).

That shows buyers are likely becoming aware of TSCO’s alpha components, and therefore more anxious to get in on each pullback.

Eventually, I expect TSCO’s buying pressure to generate breakaway momentum. So, a strong move above the $240 level will signal this niche retailer’s next big move is underway.

Best regards,

Clint Brewer
Analyst, Market Minute

Are you curious to learn more about this alpha edge and how you can apply it to your own trading?

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com.