On Monday, I explained to readers how a simple trading tool could have shown investors when to sell American Capital Agency (Nasdaq: AGNC) near its peak back in September 2012. And before that I showed readers how the same trading tool could have been used to sell Apple (Nasdaq: AAPL) before its crash started in November.

Today, I want to show you a stock you can buy right now according to the same indicator…

But first, let me explain a little more about this trading tool. It’s called relative strength, or RS. I know for many individual investors that may sound overly technical, but it’s really very simple.

#-ad_banner-#Relative strength is a factor I use to find stocks that are outperforming the market now. You see, value investors often pride themselves on patience. Relative strength helps eliminate the need for this virtue.

Buying value stocks only when RS is high can help you avoid the value trap that comes from buying a beaten-down stock that remains beaten down for years.

As I mentioned before, income investors can use RS as well. By owning a dividend-paying stock only when RS is high, you can maximize your returns by earning both income and capital apreciation without added risk.

If you aren’t using RS, then I think you’re limiting your returns and increasing your losses.

So what is relative strength?

It’s found by calculating the percentage price change over the past six months for every stock and ETF. You then sort these changes from high to low and assign the highest value a relative strength ranking of 100 and the lowest value a ranking of 0.

Every stock is assigned a ranking based on where it fits into that range. I like to use 70 as the limit for buys and sells. If relative strength is greater than 70 (meaning a stock is rising more than 70% of the market), the stock or ETF is a buy. I sell whenever the rank falls below 70.

But for my Maximum Profit system, I don’t stop there. To get a top ranking, a company must also be growing cash flow fast. In fact, to pass muster, a stock must have a ranking above 70 for that metric, meaning the company is growing cash flow faster than 70% of companies.

Why do I also focus on cash flow growth as opposed to other fundamental data?

In my testing, I have found changes in cash flow per share growth to be a more predictive fundamental indicator than sales, earnings, dividends or any of the other factors that are reported by a company.

But there’s also a logical reason: Positive cash flow allows a company to invest in its future.

If you’re not familiar with cash flow, don’t worry, it’s simple to understand.

Think about any business. When cash flow is tight, the owner often looks at cutting expenses. When this happens, growth opportunities are limited.

If the cuts hamper cash flow even more, the business begins a death spiral that can be monitored with the cash flow statements.

My favorite example of this problem is Enron.

As you probably remember, Enron was a very large energy company that declared bankruptcy in 2001. A year earlier, the company had reported $101 billion in revenue and profits of $979 million. Its stock traded near $100 a share and carried a price-to-earnings (P/E) ratio as high as 69. Yet investors weren’t worried about the high P/E ratio because revenue had been growing at an average rate of 57% a year in the previous five years.

By digging a little deeper into the company’s financial statements, diligent observers could have seen that Enron was not a good investment. While the earnings looked good, the cash flow statement revealed problems. Enron was cash-flow negative in seven of the 10 years prior to the time it filed for bankruptcy.

My Maximum Profit system would have completely avoided Enron, even though its stock price was moving higher. The fact that it was cash-flow negative would have been a big warning sign.

When picking stocks to add to my Maximum Profit system, once I’ve weeded out any company that doesn’t meet my relative strength and cash flow growth criteria, I seek out stocks that have already been picked by other StreetAuthority experts like Amy Calistri, Nathan Slaughter and Elliott Gue — stocks many of you are already familiar with.

What’s one of the highest-ranked picks? Spectra Energy Partners (NYSE: SEP), a master limited partnership originally uncovered by Nathan Slaughter in his Scarcity & Real Wealth advisory.

The MLP ships natural gas across the country and in a lot of ways acts as a tollbooth. It earns a fee for every cubic feet of natural gas it ships through its 3,200-mile network of pipelines.

As you would expect, the business makes money hand over fist, allowing it to pay a dividend yield of 4.8%. Better yet, Spectra’s distributions have increased for 23 consecutive quarters. Its stock price has risen from $30.60 per share to $40.50 in the past year. Along with dividends, investors have seen a steady gain of more than 36% during that time.

Additionally, it has stellar free cash flow growth. To determine that, I look at year-over-year growth from the two most recent fiscal years. In 2011, Spectra had free cash flow growth of $121.7 million and grew that a whopping 63% in 2012 to $198.5 million.

And, my system would have told you exactly when to buy Spectra…

Though Spectra has already seen a significant rise in six months, it is still a buy in my book. In fact, the stock’s RS has been rising so fast in the past few weeks, I regard it as one of my top picks today.  

Of course, a number of catalysts could send SEP falling. If natural gas prices were to fall again, hydraulic fracturing, or fracking, wouldn’t be as profitable, and less gas would flow through U.S. pipelines. But, the second SEP falls below that 70th percentile mark, it would be a sell, and investors would lock in any profit generated thus far.

SEP is just one of 30 StreetAuthority stocks on my radar that pay a dividend yield over 4%. And remember, because I’m using extra safeguards — testing the fundamentals and relative strength of every stock — the dividend payers I recommend in Maximum Profit usually carry lower risk than ordinary income stocks. 

You can read about two of my “Top 25 Stocks” in a presentation we’ve recently created. To learn how to get the names and ticker symbols of the other top 25 StreetAuthority holdings, I invite you to watch this presentation.

Special reminder: Right now, Maximum Profit is being offered at a discounted price for early adopters. There’s still time to lock in the lowest price we’ll ever offer, but you only have until Monday to act. To get this offer now, click here.