How to spot support and resistance levels in Advanced scans

sudhir_shet

Hi,

I want to scan stocks that are near historic support or resistance levels. How can i code that in the advanced scan?
I use the visual Auto Support and resistance tool but want to automate that in the Advanced scan.

Is there a way to do it?

Cheers,
Sudhir.

markd

Hi @sudhir_shet

The Auto Support/Resistance tool in the Annotation function is placed manually on the chart at levels chosen by the user. If you want to know when a stock has hit one of those levels, you could use the Technical Alert workbench to tell you when a specific stock has approached or crossed the specific price you designated as support or resistance. So, suppose you determine there is support for IBM at 120. Your alert would be

[symbol = 'IBM'] and [120 x close]

You could have alerts at several prices, and/or for several stocks, depending on your subscription level.

But, if you want to scan many stocks to see if any are near past support or resistance, you need a different approach. You don't want to ask for specific price levels because support and resistance can occur at any price, and will be different for different stocks.

Instead, there are at least a couple of different methods. For instance, you could use price channels or Fast Stochastics with custom parameters. These will give results that are often, but not always, near support or resistance.

For price channels, you would first choose a time frame looking for say, monthly (20 or 21), quarterly (63), semi-annual (126) or annual (251), and then look for a cross below the lower price channel. For instance:

and [Lower Price Chan(63) x low]

That would find stocks where the low broke the quarterly lower price channel. For resistance, you would use

and [high x Upper Price Chan(63)]

That would find stocks where the high broke the quarterly upper price channel.

The thing about price channels is they look back to find the highest and lowest price in the period you specify. Those highs and lows often represent real support or resistance, but they could represent a rising low or a falling high that is not the end of a move down or up.

Stochastics is similar, because you can ask for where a stock has closed relative to its range in the period you specify. So for instance:

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

That says, today's close crossed into the lower 20 per cent of the most recent 21 day range. That means price is probably near past support (or it may have broken it). Especially in an up trend, this is often an area where buyers begin to show up. This scan would not nail the support or resistance level, but just give you a heads up. In a down trend, if you were looking for resistance, you would use

and [Fast Stoch %K(21,1) x 80]

That would get stocks closing in the top 20 per cent of the recent range, where sellers may appear.

You can play with the parameters and back test random dates over several years so you see what happens in different markets.