The Fouda Score is a proprietary multi-factor scoring model that evaluates Egyptian stocks on a 0-100 scale. Unlike simple indicator-based systems, it combines six distinct factors, each capturing a different dimension of stock behavior. The factors are weighted based on their historical predictive power for EGX stocks. Understanding each factor helps you interpret why a stock receives its score and make more informed decisions.
Factor 1 — Trend Strength (highest weight): This factor measures how well-aligned the stock is with its moving averages across multiple timeframes. It evaluates: (1) Price position relative to 20, 50, and 200-day SMAs. (2) Moving average alignment (are shorter MAs above longer MAs?). (3) Rate of change of the moving averages (are they accelerating or flattening?). A stock above all three MAs with accelerating slopes receives the maximum trend score. A stock below all MAs receives minimum. This factor has the highest weight because trend alignment is the strongest predictor of future returns in the Egyptian market.
Factor 2 — Momentum: Measures the rate and acceleration of price change using multiple oscillators. Components: (1) RSI level and direction (rising RSI above 50 is positive). (2) MACD histogram value and slope (positive and rising is best). (3) Rate of change (ROC) over 10 and 20 periods. (4) Stochastic RSI position. The momentum factor captures whether buying pressure is accelerating or decelerating. It complements trend strength by measuring the "speed" of the trend.
Factor 3 — Volume Confirmation: Evaluates whether trading volume supports the price trend. Components: (1) Volume relative to 20-day average (above 1.0 is positive for trending stocks). (2) OBV trend direction (rising OBV confirms bullish price action). (3) Volume-price divergence detection (price rising on declining volume is negative). (4) Unusual volume spike detection. Volume confirmation ensures the price movement has genuine market participation behind it, not just a handful of traders.
Factor 4 — Volatility: Measures risk-adjusted price movement. Components: (1) ATR relative to price (lower is better for the same trend strength). (2) Bollinger Band width (narrow bands after a squeeze are positive when combined with directional signals). (3) Historical volatility rank (current volatility vs. past 52-week range). Lower volatility with strong trend and momentum is the ideal combination. High volatility stocks receive a penalty because their strong scores might be noise rather than signal.
Factor 5 — Relative Strength: Compares the stock's performance against the EGX30 index and sector peers. Components: (1) 1-month, 3-month, and 6-month relative performance vs. EGX30. (2) Sector-relative performance (is this the strongest stock in its sector?). (3) Relative strength rank among all tracked stocks. Stocks outperforming the market tend to continue outperforming — this is the "momentum anomaly" documented in academic finance. This factor is stored as score_valuation in the database (legacy naming).
Factor 6 — Microstructure: Analyzes market structure signals that indicate institutional activity. Components: (1) Smart money detection (accumulation/distribution patterns). (2) Liquidity vacuum identification (price zones with minimal volume that price may traverse quickly). (3) Bid-ask spread analysis (tighter spreads suggest more institutional interest). (4) Block trade detection. This factor helps identify stocks where institutional investors are building or reducing positions. All six factors combine into the final 0-100 Fouda Score, updated daily after market close. This is not financial advice.
This content is for educational purposes only and does not constitute financial advice. Always do your own research before making investment decisions.