FoudaLens generates five distinct trading signals based on the combination of the Fouda Score, individual factor readings, and market conditions. These signals are designed to be actionable — each one tells you not just what to do but WHY. Understanding the logic behind each signal helps you make better decisions and avoid blindly following signals without context.
BUY_CONTINUATION fires when a stock is in a strong uptrend with confirming momentum and volume. Conditions: Fouda Score above 65, ADX above 25 (trending), RSI between 50-70 (bullish but not overextended), positive MACD histogram, volume above average, and price above 50-day SMA. This signal means: "The trend is strong and healthy — this is a good time to add to or initiate a position." It is the highest-conviction buy signal because all factors are aligned.
BUY_PULLBACK fires when a stock in an uptrend has temporarily pulled back to an attractive level. Conditions: Fouda Score between 40-65 (moderate, reflecting the pullback), price above 200-day SMA (long-term uptrend intact), RSI between 30-45 (short-term oversold), price near 50-day SMA or a Fibonacci retracement level, and declining volume on the pullback (healthy correction). This signal means: "The long-term trend is still up, and this pullback is a buying opportunity." It is a mean-reversion signal within a trend-following framework.
WAIT fires when conditions are mixed or uncertain. Common scenarios: (1) Fouda Score between 35-55 with no clear trend. (2) ADX below 20 (no trend). (3) Conflicting signals (RSI bullish but MACD bearish). (4) Price trapped between 50-day and 200-day SMAs. (5) Low volume indicating lack of conviction. This signal means: "There is no clear edge right now — keep watching but do not commit capital." WAIT does not mean the stock is bad — it means the timing is not right.
REDUCE_RISK fires when a stock shows signs of trend deterioration. Conditions: Fouda Score declining from above 65 to below 55, ADX declining from above 30 (trend weakening), RSI showing bearish divergence at overbought levels, MACD histogram turning negative after a bullish run, or volume divergence (price rising on declining volume). This signal means: "The trend may be ending — consider tightening stops, taking partial profits, or reducing position size." It is a warning, not a sell signal.
AVOID fires when multiple factors indicate a stock should not be bought. Conditions: Fouda Score below 30, ADX confirming a downtrend (DI- above DI+), RSI below 40 and declining, MACD below zero and falling, price below both 50-day and 200-day SMAs. This signal means: "The stock is in a downtrend with negative momentum — buying here is fighting the trend." AVOID does not necessarily mean sell if you already own it (that depends on your stop loss plan), but it means do not buy more.
Important considerations: (1) Signals are generated daily after market close based on the latest data. (2) A signal on a single day should be considered in context of recent signals — a stock that switches from BUY to WAIT for one day may simply be pausing. (3) Always use your own analysis alongside signals — they are tools, not orders. (4) Position sizing and risk management remain your responsibility regardless of the signal. (5) During market-wide sell-offs, even good stocks may generate REDUCE or AVOID signals temporarily. 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.