How to Avoid Saw-tooth Stocks in scanning?

PeterPan8

I am trying to create a scan that would avoid what I call "Saw-tooth" stocks (picture 1), and get results for smoother charts (picture 2).

What indicators should I use for my scan: ATR, Standard Deviation, Ulcer Index, others?
What criteria should I be looking for?

I am confused as to how to use those to find "smooth charting" stocks. Is it a question of low volatility? Don't know!

Any ideas?

lmkwin

What does your scan look like now?

markd

Of the top of my head, I would say SCTR, because it accounts for longer term as well as short and intermediate term performance. Stocks that continually retrace probably wouldn't make the upper reaches of the SCTR system. Of course there can be exceptions.

Another possibility might be ADX Line, which measures trend. A trending stock like your second example would probably not reach some lower bound value, so you could test for min ADX Line greater than that lower bound.

Or maybe you could do the same with PPO Line - if the trend is good it should stay above zero for an extended time, so you could test for that.

I'm just guessing.

P.S. another one I just found - Ease of Movement. It looks like a more volatile stock would have more extreme readings, so you could test for max EMV below some threshold.

As Chip often points out, the scan engine is really meant to find crossover signals, meaning discrete events rather than patterns over time, so no matter what you do when looking for patterns, you will get some unintended hits and miss some hits you would take. But maybe worth a try.

PeterPan8

@Imkwin: I don't have a scan yet. I needed some "directions" to play with first.

@markd: I'll play around your ideas. I didn't think about EMV, that might be an interesting path to follow. Tks for all you do here!

lmkwin

@PeterPan8

Like you, I build my scans, thinking wise, backwards. I determine what I want to see and then try and find it.

I find a chart that shows what I like and then fit some indicators on it to try and match what a good appearance would be. I'm a bit chauvinist regarding charts and try to only own and look for good looking charts. Bad looking charts can belong to someone else.

A "steady" rising stock probably will display a bullish looking slow or intermediate indicator for a while. Pick your favorite indicator, whether it's a MA or a Price Channel, or Stochastic, or a fun one is the Parabolic SAR. All choppy stocks will create Parabolic SAR crosses. You may just need to play around with the settings a bit to find what you really want to see.

After you find the ideal chart, then use the settings to apply to scans, and see what you find.

I find that it all boils down to the crosses that @markd talks about. EMV looks interesting. If the default on the EMV remains above the 0 line, most likely the stock isn't showing choppy or saw tooth.

PeterPan8

Thanks lmkwin, good thoughts to churn on!