Volatility contraction scans?

AirborneTrader

Does anyone have any suggestions on how to scan for volatility contractions? Be it through Bollinger Bands, Keltner Channels etc.. The goal is to find stocks that are in uptrends and then sell off followed by a contraction in volatility. I'd appreciate any suggestions thank you!!!

markd

I think there was something similar to this on the old s.c.a.n. - I know it's not my idea. And I may not have remembered it exactly, but I think it was something similar to this:

// Bollinger bands inside Keltner channels, and BB Bands at narrowest width in 3 months:

[group is sp500]

and [Upper Kelt Chan(20,2,10) > Upper BB(20,2) ]

and [Lower Kelt Chan(20,2,10) < Lower BB(20,2) ]

and [BB Width(20,2) = min(63, BB Width(20,2))]

and [sma(200, close) > 20 days ago sma(200,close)]

and [close > sma(200,close)]

It seems to be more a set up than a signal. It may catch tops as well as continuation ranges. You could probably tweak it to get better results.

AirborneTrader

Awesome! Thank you. That's the kind of stuff I'm looking for. More of a setup and not a signal. Ironically I think I came across this code months ago searching for a way to scan for John Carter's TTM squeeze. I haven't been able to find it again til now as it happens to be volatility contraction too. Thanks a lot! Great forum to share ideas and scans.

ucsgears

well, the true way to scan for John Carter Squeeze is

bollinger band width (20,2) < ATR(10)*3

That will pull the exact squeeze condition.

lmkwin

The TTM Squeeze uses 1.5 on the Keltner Channel, if the ThinkorSwim TTM Squeeze indicator is correct.

So for Daily squeeze

and [Upper BB(20,2) <= Upper Kelt Chan(20,1.5,10)]
and [Lower BB(20,2) >= Lower Kelt Chan(20,1.5,10)]

For Weekly squeeze

and [weekly Upper BB(20,2) <= weekly Upper Kelt Chan(20,1.5,10)]
and [weekly Lower BB(20,2) >= weekly Lower Kelt Chan(20,1.5,10)]

For monthly Squeeze,

and [monthly Upper BB(20,2) <= monthly Upper Kelt Chan(20,1.5,10)]
and [monthly Lower BB(20,2) >= monthly Lower Kelt Chan(20,1.5,10)]

I'd shorten up the 'monthly' periods but that is a personal preference thing. On ThinkorSwim they also offer quarterly charts. Same principal on the squeeze, but I'd shorten up the period again. 20 quarters or 20 months is certainly an indicator of long term consolidation, but, probably better to use shorter period for actionable situations, if so desired.

Swinger72

Is the "John Carter Squeeze" the same as the TTM squeeze on TOS?

lmkwin

I believe that they are. I copied the parameters off TOS for the one above. I believe the one on TOS is based on the John Carter Squeeze.