MarketSmith Review – Is This IBD Stock Analysis Service Worth Using?

What is MarketSmith?

MarketSmith is a comprehensive stock analysis service from Investor’s Business Daily (IBD). The platform is designed to help experienced traders quickly identify trends and breakouts, and pairs automated technical analysis with daily stock ideas and fundamental metrics.

Compared to IBD’s other products like Leaderboard and Swing Trader, MarketSmith is more advanced and requires a more self-directed approach. In our MarketSmith review, we’ll help you decide if this platform is right for you.

How Much Does MarketSmith Cost?

You can try out MarketSmith for three weeks for $19.95. After that, the service costs $149.95 per month. 

What Do MarketSmith Members Get?

 Charts

MarketSmith revolves around its charting interface. Charts within MarketSmith are only slightly customizable. You can change the timeframe (from 1 minute to monthly), add moving averages or stochastics, and show or hide various data boxes. Only candlestick charts are available. 

However, the real power of MarketSmith charts lies in all the data they bring together by default. The technical charts are surrounded by data boxes showing fundamental metrics. You can see EPS and P/E ranges broken down by quarter and by year, as well as A-E ratings for categories like IBD’s proprietary SMR rating (which looks at profits, sales, and growth over time).

MarketSmith also has a pop-out panel where you can monitor news headlines for any stock, check options activity, and grade a stock against checklists like CANSLIM or Warren Buffett’s stock criteria. You can also grade stocks against your own custom screens to see what parameters are passed or failed.

Automated Pattern Recognition

A big part of the value that MarketSmith provides comes from its automated chart annotations. The algorithm that IBD has developed specifically looks for 9 patterns that indicate the formation of a base:

• Cup with handle
• Cup without handle
• Saucer with handle
• Saucer without handle
• Double bottom
• Flat base
• Ascending base
• Consolidation
• IPO base

Using these patterns, MarketSmith looks for stocks that are setting repeatedly higher or lower bases over time – a sign of momentum and strength. For any pattern, you can see how much the price changed during pattern formation, how long the pattern took to develop, and how many bases have formed prior to the current pattern. MarketSmith also highlights pivot ranges, which are previous areas of resistance.

Notably, MarketSmith doesn’t offer clearly defined buy or sell points. It’s up to you to interpret the patterns that the service annotates and, in conjunction with the fundamental data provided, decide how and when to trade.

Stock Ideas and Screens

MarketSmith does help you find actionable stocks to trade by offering daily stock ideas. These are essentially pre-made screens for patterns like breakaway gaps, bullish action on strong volume, and breaks above a resistance zone. The platform also provides pre-made stock screens based on its checklists, so you can narrow your search initially by looking only for stocks that meet important fundamental criteria.

You can also create your own stock screens using a wide variety of fundamental and price filters. However, the screen builder tool doesn’t let you incorporate chart annotations or base patterns, which was a little disappointing.

Alerts

MarketSmith also lets you set up alerts for a variety of different events. You can opt to receive a notification or email when a stock crosses a key moving average or breaks above a resistance area on above-average volume. You can also set up alerts for upcoming earnings or price gaps following earnings. The alerts tool makes it easy to see all of your active alerts and to reactive alerts that have already triggered.

Lists

The platform also lets you create an unlimited number of watchlists. The lists feature is especially handy because you can browse all stock ideas results, all of your saved screen results, and all of your alerts in a single window. You can also instantly play through a slideshow of charts for all the stocks on any list, which is a great way to start the trading day.

MarketSmith Customization and Layout

Despite the advanced nature of MarketSmith’s platform, you have relatively little control over its layout. You can hide individual panes or data boxes, but you can’t easily zoom in on charts or customize the size of any data panel. In addition, the overall layout of the platform – charts in the center, checklists on the right, screens on the left, and lists on the bottom – is fixed.

How Does MarketSmith Compare?

MarketSmith is an unusual service in that it brings together automated technical charting and fundamental data. While there are other tools that offer automated chart analysis, it’s rare to see this feature combined with checklists for value investing or in-depth fundamental screeners. On top of that, MarketSmith’s focus on finding base-forming patterns, as opposed to focusing on candlestick patterns or taking a narrower view of breakouts, is somewhat unique.

It’s important to note, though, that MarketSmith isn’t a full-fledged charting platform. The service doesn’t let you add a variety of popular technical indicators, including ubiquitous ones like Bollinger Bands and MACD. The platform is extremely powerful for identifying value stocks with strong price momentum, but it doesn’t stray beyond this purview and has only limited flexibility.

Is MarketSmith Right For You?

MarketSmith is best for swing and momentum traders who are interested in finding undervalued stocks in the midst of sustained price movements. The patterns that MarketSmith identifies typically take several weeks to months to develop. So, while the platform offers intraday charts, it’s not all that well-suited for day trading.

On top of that, MarketSmith is designed for traders who are willing to do their own homework. The service doesn’t issue buy and sell signals based on the patterns it identifies – that’s what IBD’s Leaderboard and Swing Trader services are for. Rather, the service leaves it up to you to combine MarketSmith’s automated pattern identifications with the platform’s checklists and their own screens to make trading decisions. 

Pros

• Combines technical charting and fundamental analysis
• Automated pattern analysis to find bases and resistance
• Checklists based on investing approaches like CANSLIM
• Actionable alerts and daily stock ideas
• Three-week introductory period 

Cons

• Expensive monthly subscription
• Limited flexibility in layout and chart analysis tools