Pullback in an uptrend

ratbhatt

Hello everyone especially @markd , :-)

I know this has been extensively discussed so many times in the past and everyone has a point of view and its been discussed here. But I was wondering if there is a starter idea/strategy with which I could tinker. So basically the thought process is that the stock is in an uptrend. I would also like to somehow amalgamate the sector which is moving upward. So basically the stock is moving well along with its sector(may be true/may not be true) and there is pullback which I would like to capture there. Is there a starter query and follow up chart analysis that i could use to form a strategy. Can you help me a bit here @markd . Your thought process can really help me achieve a trading pattern to which I would like to stick to.

Thanks again
Ratul

ratbhatt

in essence I would first like to find a good way to find

if the stock is in uptrend ( there are many ways but which is a good standard mechanism? above 200 and 50 MA? Can I add anything further to strengthen it?

Then if there is a pullback which I want to catch.

And if exists then how to choose the entry point( should i use fibonacci retracement?)

I am really naive and may be most of my questions are really dumb. But any advise and direction will be of massive help.

ratbhatt

I honestly dont even know if this is a good trading setup or not. I am looking for some guidance as well.

markd

Well, I think you are on the right track in your thinking. Here's what I would recommend to start.

Keep a list of the nine sector SPDR ETFs - XLE, XLB, XLI, XLY, XLP, XLV, XLF, XLK, XLU.

On your chart style for this list, include the Price Performance indicator with parameters $SYMBOL:$SPX. Add an Simple MA 63 (or 50, if you prefer) to this indicator. The strongest sectors will have the best reading on this indicator and tend to be above the MA. Alternatively, you could run a scan periodically (maybe weekly) against this list to rank them by ROC(63) (daily timeframe). This gives you the list in order by best quarterly performance.

Write the scan by inserting your SPDR list above, then add

rank by ROC(63)

If you are ambitious, you could also make a list of industries for each sector (so 9 lists). Each industry has a $DJUSxx index that corresponds (roughly) to the industries listed in the Sector and Industries dropdown on the Advanced scan page. You have to look for them in the Symbol look up. On those charts, add the Price Performance indicator and use $SYMBOL:XLE, $SYMBOL:XLB, etc. And you can also run the rank by scan against those lists. That will give you the strongest industries in the strongest sectors. But also review the lists for changes from weakness to strength.

Now when you are looking for trades, you can limit your scans to sectors or industries that are strong or getting stronger by specifying the sector or industry(ies) in your scan. If you are doing US stocks, I would limit the scan to stocks with a market cap greater than 200M to limit the junk.

and [ [exchange is NYSE] or [exchange is NASD] ]
and [market cap > 200]

To specify a rising trend:

Early trend would be a crossover, so

// LT MA still falling
and [sma(251, close) < 21 days ago sma(200,close)]
// MT MA crosses above LT MA
and [sma(63,close) x sma(200,close)]

// or just MT MA above the falling - choose one
and [sma(63,close)] > sma(251,close)]

(Note: LT = long term, MT = medium term; you could also use 200 and 50).

Trend under way would be MT MA above rising LT MA.

and [sma(251,close) > 21 days ago sma(251, close)]
and [sma (63, close) > sma(251,close)]

Note this doesn't test for the MT MA rising, too. That's because you want to buy pullbacks, and those might make the MT MA turn down.


Next you want to get the pullbacks.

Most often, it seems to me, pullbacks will end, if they are going to end, somewhere in the area of a strong volume bar in the preceding up leg. That could be near the high if the pull back is weak, or in the body or around the low if the pull back is stronger. Strong pull backs will only hesitate there, so you can get fooled.

Unfortunately, you can't scan for that condition. But, turnarounds also sometimes coincide with crossing price channels. Price channels mark past highs and lows with a time frame you designate. I use 10, 21, 63 and 251 day price channels on my charts. You can scan for crossovers, or near crossovers with

and [20 x Fast Stoch %K(21,1)]

Substitute the other parameters for 21 to scan for longer or shorter time frame crossovers.

On your results list, look left, and see whether the crossover is at or approaching a strong volume bar in the prior up leg, or a prior high or low. If it is, then over the next few days, look to see if sellers get weak or buyers get strong. If they do, that could be an entry. But you have to watch the follow through, because many don't succeed.

Reversals also tend to occur after the LT or MT MAs have been crossed, so you could scan for that as well, and keep a watch list of the results.

// MT MA cross over (close crosses under)
and [sma(63, close) x close]

or, in a separate scan

// LT MA cross over
and [sma(251, close) x close]

That should get you started at least.

ratbhatt

Thanks a lot @markd . Its a lot to digest. I am sure I will have many further questions. I will get back once i fully understand your post.

WGFF

Sorry to be late to the party - here's a couple of things that work for me...thoughts and techniques I've seen in some of Art Hill's / Tom Boley's contributions to the site.

1. I make a scan for one of our Key trend/strength indicators: SCTR and/or Chande Trend Meter. Something like [SCTR > 70].....or [Chande Trend Meter >= 70].....but use any value that suits you.
2. I add to the scan: and [RSI(5) X 30] In other words, in some stock with some significant trending values of SCTR or CMT, there suddenly comes a few bars or weakness - for any reason. And the very short term RSI(5) drops below 30. Typically in a strong stock this condition only lasts for a bar or 2, but maybe 3 bars.
3. Uptrend resumes / price moves up / RSI(5) IMMEDIATELY jumps up above 30 - the scan code that captures this price movement is above.
4. And that point is a good buying point.
5. Forgot to add that I also have a medium to long term trend indicator filter these crossing points........such as 'and [slope(50) > 0.1]'. This keeps you from buying in a downtrending stock undergoing a brief / small rally in most instances.

As MarkD describes above, you could also scan indexes / stock sectors / ETF's etc. with this same technique to narrow these scans down to stock market sectors which are healthy and generally trending upward. The Chande Trend Meter (CTM) works on ANYTHING, if the index, etc. has no SCTR.

ratbhatt

Thank you so much @WGFF . That is quite insightful.

ratbhatt

Hello @WGFF : I didnt understand this line

5. Forgot to add that I also have a medium to long term trend indicator filter these crossing points........such as 'and [slope(50) > 0.1]'. This keeps you from buying in a downtrending stock undergoing a brief / small rally in most instances.

Can you help me understand a little more?

ratbhatt

I wrote this scan so far

[type = stock] AND [country is CANADA] AND [Daily SMA(20,Daily Volume) > 50000] AND [market cap < 2,000] AND [market cap > 300] and [name not contains "Trust"] and [name not contains "Notes Due"] and [name not contains "Shares"] and [name not contains "Fund"]

and [SCTR >70]
and [RSI(5) X 30]
and [Chande Trend Meter > 70.0]

ratbhatt

this scan is really good. picks up some real good pullback scripts. I now need to figure out how to set alerts on whenever these instances happen.

ratbhatt

I just wanted to say thanks to @WGFF and @markd for all the help. The pullback scan is pretty amazing. One thing I have generally noticed is that I spot these 3-4 red candles during the first hour of the day. After that most of the times during the day it returns nothing. I dont know what is the analogy behind it but I traded 3 times and all of them good and decent 6-7% returns. Thank you very much.