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Improvise: Using IBD's Stock Checkup To Quick-Study Charts

The old craftsman's adage preaches, "Use the right tool for the job.

But every artisan knows how to improvise in a pinch and often discovers in the bargain that the right tool is usually one's brain.

So what if we used Stock Checkup at Investors.com in order to spot-check the quality of a stock's base? At the very least, it can get you off to a smart start.

Let's study the ETF asset management service company WisdomTree Investments (WETF). The stock is carving higher in the 10th week of a V-shaped cup base. The base is 28% deep, and the stock has been climbing the right side for the past four weeks.

Using the Stock Checkup function to gauge the situation, we scan down the Stock Checkup list and find most of the lights are green, a good sign.

Technical factors will weigh more heavily than fundamentals in scoring the base.

On the technical side, WisdomTree gets a red light on price, which was only 13.27 as of Tuesday's close. It gets a caution sign on Up/Down volume, which gauges buying and selling pressure on a stock. WisdomTree's number recently edged up to a neutral 1.0; 1.1 or higher is ideal.

One of the most important things the Stock Checkup tells you is whether you should be looking at other stocks in the group ahead of your current pick.

With WisdomTree, we can see it has a solid Composite Rating of 97. Only one higher-rated stock is in the group. WisdomTree's 94 Relative Price Strength is fourth best. In both cases, it is easy to check the higher rated stocks and see how they compare.

On the fundamental side, WisdomTree's EPS Rating is 17th in the group. This is surprising, given the stock's strong quarterly numbers.

But WisdomTree has only two years of annual EPS gains under its belt. This weighs down the ranking.

Its top-notch SMR rating of A makes up the difference and is equal to the best in the group.

WisdomTree's Accumulation/Distribution Rating is a B- and ranks 31st in the group.

That's not great, but it also doesn't really jibe with the picture of institutional accumulation we get when we eyeball its weekly chart. The chart shows three out of four weeks up on the right side of the base trading in below-average volume. All, however, end in the upper half of the week's range; this suggests accumulation even if volume is weak.

Also, the stock bottomed out in strong trade and ended high in the range in the week ended June 28. (1)  These are both solid signs. The base's main weakness, other than the stock's low price, is its V-shaped outline.

The result suggests the Stock Checkup is helpful for added perspective or a cursory initial check. But it confirms that nothing substitutes for the skill of learning to directly read and study price-and-volume charts.