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Suggested scan parameters for pullbacks in trending stocks?
I'm a swing trader that uses stockcharts for most of my research and scanning. It's an amazing site and tool. Most of my trading involves buying strong trending stocks that pullback to support levels or trendline. I don't wait for confirmation, I like to estimate support in advance, especially a convergence of levels, from pivots to MAs, and I set limit orders in advance, buying on the dips. I continue to experiment with different scan parameters but would appreciate suggestions on scanning for pullbacks. Especially those that are trending. OBV divergence is another interesting one, I'd appreciate suggestions on that one too. Thank you in advance!
In good up trends, it seems support often occurs at or soon after one of these events
// K 10 crosses below the the 20 line - near a two week low
and [20 x Fast Stoch %K (10,1)]
// or K 21 crosses below the 20 line - near a one month low
and [20 x Fast Stoch %K (21,1)
// or K 63 crosses below the 20 line - near a quarterly low
and [20 x Fast Stoch %K (63,1)
For all three cases, the sharper the angle of K when crossing below 20, the more likely a good buyer response.
The odds seem to be better if K10 and K21 cross below 20 together; also better if K 63 crosses below 50 when when K10 and 21 cross below 20, or shortly (a few bars) after.
These are just set ups - heads ups to pay attention, not actual signals (except sometimes they really are the signal, it depends on the market).
The actual reversal seems to occur pretty often in the range of, or sometimes slightly below a high volume bar (above average and higher than the day before) in the preceding leg. Often it's the first higher volume bar out of a mid-leg congestion area, or above a breakout level if the leg is the first out of a range area.
In other words, it a place where buyers definitely took control of the action, and sellers are going back to test that spot. Indicators are usually too late to pick up this spot - I think you have the right idea to put in an order ahead of time.
Whether to place the order depends on the action. It seems the best tell-tale is the higher volume bars - if the higher volume bars in the most current leg up are turning red (closing down), it's a more doubtful situation. If the higher volume bars are black (closing up) but the range or bodies are small (longer wicks and/or tails), or don't make new trend highs, it's also doubtful. Also, if buyers respond weakly (low volume, even with good range) to strong selling, it's not a good sign.
Hope that helps. Comments welcome.
Thanks a lot for taking the time to share all that. That's awesome! I really appreciate it. I'm gonna look into and play with what you wrote. That's the great thing with the screener you can experiment with it, tweak it.. The scan I use the most is based on the CCI correction strategy shown on stockcharts. Scanning for stocks that have CCI(20) below -100 or so with CCI(100) above 0 for the longer uptrend. It works pretty good. So I'm more familiar with that indicator but will review the stochastics. I find overbought/sold RSI2 scans can bring up interesting candidates. There are so many possibilities, it's an amazing tool. At Starbucks now playing with it. Thx again!