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How can I scan for an up-side Break-out?
I checked the pre-defined scans in the advanced scan engine and could not find code for an up-side breakout. I also searched S.C.A.N. and did not find any suggested code. Does anybody have a bit of code they use for that? Even better would be code for an upside break-out with a pull-back. But just the Break-out would be just fine. Thanks.
Also, like you, I think I might prefer pull-backs. I would love to know how you scan for those.
1. I now understand well (not only with your explanation but also with the example at the bottom) what you meant by the rising intermediate term MA needing to withstand the test.
2. I gained good insight from your comment on AEE that you could have "guessed" that a double bottom was coming because the candles for the huge down volume days were not well formed (and especially not able to hit a lower low). Thanks.
3. On the AEE trade, which day (or days) would you have bought this stock? Would you have bought on May 20th, 24th or 25th with a stop at about $45.50 or bought on June 6 with a stop about $48?
4. After I digest the scan and I try it out a bit, I may have a question about it.
The ideal entry is immediately after sellers have clearly capitulated. Sometimes that is clear, other times you can't be sure. Almost always, there is a local trend reaction to any counter trend event. So on AEE, May 19 closes up, above the midpoint, on wide range and low volume. That is a counter trend move (using the direction of the a short MA, like 3 or 5, to describe the local trend), but an ambiguous one because its a down bar (lower high and low) and the volume is low. If the down trend is strong, it should be able to defeat that move.
On May 20, it looks like sellers will defeat the move because the up bar (buyer follow through) closes down on high volume. So higher prices are attracting selling, as they should in a local downtrend.
On May 23, the good form down bar makes a new down leg close, but it's on very light volume. Lower prices are not attracting new sellers (or buyers).
On May 24, buyers return, but again on very light volume. Form is good, but range is only moderate compared to the prior bar, and the close is lower, so buyers are weaker than the prior up close. But - at this point, the local trend is still down - buyers are expected to be weak. Sellers have the obligation (so to speak) to make new lows, and they haven't done so for three days.
On May 25, more sellers than buyers show up (down close on higher volume), but they cannot make a new low close against weak buying. In a down trend, when there are more sellers than very weak buyers but they cannot break the prior low, or make a new close, they, too, must be very weak.
On May 19 and 24, buyers showed they were willing to take the initiative. We can guess that they will be willing to try once more, having proof of seller weakness (in an up trend it's pretty safe to assume that buyers want to buy, until you see that they don't). So, if we want to join them, we could put in a market order for the next open (May 26), or a buy stop above the May 20 high (last best effort of the buyers) or the May 24 high (most recent best effort).
We don't know whether higher prices will attract more selling again. We only know the down side is not attracting sellers in an intermediate and long term up trend (63 MA rising above 251 MA rising). Depending on your confidence, you might put a stop under the May 19 low (last best effort of sellers, or the May 23 low (second best, most recent effort).
Bottoming patterns don't always develop so neatly. But if they are going to work, USUALLY, they will not retrace much below the mid point of the strongest counter trend bar (like May 19). So, once you see the strong bar, you could put in an order around that mid point with a stop under its low or a nearby low that represents the max strength of sellers. That's aggressive, and you could get stung, but not too badly, as long as the longer trend is up and there haven't been many (or better, any) high volume, good form down bars breaking the lows of strong up bars.
Taking into consideration all your chart tells you about the price-volume action during this period (but of course not knowing the future of the stock after May 26), where would you put your own entry and stop?
Thanks again, BobS
I probably would have passed this one over in real time, because there is only so much time to analyze, and this one broke the MA 63 pretty seriously, which is usually a disqualifier for me.
But, assuming I took the time to think about the potential double bottom, and came to the conclusions outlined above, hindsight being 20 20, I think I would have wanted to play this one aggressively - on the night of May 19, put in an alert in around the midpoint of that bar, which would have been triggered on May 23. At that point, since the market closed below it, enter the order at that midpoint (or look at the intraday action to see if there's a better place). Place the stop under the May 19 low.
You could be aggressive on this one because, in addition to the price/volume action, the SCTR has improved tremendously vs the prior bottom (30ish to 70ish) and the red RS (AEE:$DJUSMU), the stock vs. its sector, is ticking up, too, even on down bars (May 17, 18), showing this is a preferred stock in its group.
Note again, I'm not saying I would have chosen this stock to trade from all those in the scan results. I randomly picked this one (with the other one) in hindsight to illustrate the range of possible results, and that the scan itself picks both winners and losers, and choosing the best trade requires more work. No magic bullets.
But, these comments inspire me to use alerts more. Do you do these through StockCharts? Also, why would the alert you mentioned that you might have considered putting in the evening of May 19 not have triggered on May 20 or 21, both of which had points during the day when price was above the midpoint on May 19?
The answer to that question may help me know how to word alerts more wisely. Thanks again.
1. How did you select 21 as the Lower Price Channel to test for? Is there another reason besides the fact that 21 is the number of trading days in a month?
2. Does checking for 1 ATR from the Lower Price Channel of the High and the Low as well as the Stochastic being below 20 give you more good hits to choose from?
3. Do you use this scan to catch stocks after a correction or just just stocks which are clearly in an uptrend and now pulling back?
4. You mentioned above that it is safer and more profitable to trade a stock which is also part of a sector which is rising out of a pull-back and using a sector performance chart to find these sectors. So, I assume that you then run this scan on stocks in those recovering and preferred sectors. Rather than run it on all stocks in that sector, do you filter that large number of stocks for other traits (either through a scan or visually on the charts)? The reason I ask this question relates to suggestions you have made in the past for preferring stocks whose bars "behave more like they have professionals trading them" (more nicely formed bars). Have you compiled a short chartlist of stocks for each sector which typically have more well formed bars?
Thanks so much. BobS
1. Do you find the sectors (and then industries) with 63 MA and RS vs SPX both rising by a scan or customized candle glance charts?
2. How many industry lists have you built?
3. In selecting stocks for these industry lists which act like institutional (or sponsored) stocks, I suspect you look for a predominance of well-formed bars. Are there other things you look for, like a more predictable period between peaks and troughs?
1.There are only 9 sectors so those are easy enough to view in Candleglance. My Candleglance chart style includes RS (vs SPX), which you can't scan for anyway. Likewise with the industries within the sector (with RS against SPX and also the sector). I have used scans to rank them by ROC over periods of time, but after doing that for a while I found eyeballing RS is OK. Not precise, but its not really a game of precision.
2. I have an industry stock list for every $DJUS index. So its one list for the SPDR sectors, then for each sector, a list with the all the DJUS indices (per the listing in the Sectors and Industries drop down, which can vary from other sites like Finviz and Yahoo), then for each index a list of stocks filtered as explained.
3. The industry stock lists are all stocks that pass the filter. I don't edit the industry lists beyond the filter because price behavior for individual stocks can vary over time. So some that you might exclude for being too volatile or irregular later calm down, while formerly well behaved stocks can fall apart. The point of having the industry lists is they serve as targets for your scan when the sector and/or index shows positive signs. Often its the biggest market cap stocks that are moving the index, but there can be followers (or even leaders) in the lower caps.
1. If I were to raise my minimums for market cap and/or volume, are there levels above which almost all of the stocks would either have institutional support or act as though they do?
2. What is the minimum amount of daily volume you prefer to make sure you have enough liquidity to get out quickly if you need to?
2 more questions would really help.
1. Above you said something very helpful, namely "The ideal entry is immediately after sellers have clearly capitulated." As I have learned from you in the past, one sign of this capitulation is when there is a very large down volume day but which moves price down very little. It would seem this would be a great time to buy because sellers have been worn out by buyers and because there is a small distance between the trough where you should set the stop and the day's high above which you should need to set the buy order. Is that right?
2. What I am less clear on is another candlestick pattern that seems to indicate that the sellers have capitulated, namely a hammer or inverted hammer. Unfortunately, both of these have a long stem (wick or tail). Do you have a suggestion of how to handle these situations without a huge stop?
Most industry groups have fewer than a hundred stocks, so if you first determine the strongest sector and/or industry RS (or recovering RS) and scan only against that first, you will probably get fewer hits. Or you could rank results for your present scan by either industry or sector and concentrate on the hits from the sector or industry getting the most hits, on the (not necessarily valid) assumption that that area of the market is getting significant attention. (This is a reason to include stocks in your list you might not trade - to see what is the interest in the industry or sector). Or, in Candleglance, eliminate anything that has a downward sloping RS line (symbol:$SPX). If that still leaves a lot, look for the ones with the most regular price and volume action and very few or no disqualifying negative events - like solid red down bars that break support on notable volume, from which recovery was weak. You want to see that sellers haven't been winning cleanly (good form and above average volume) recently, or if they do, buyers come right back. This last is easier to see in 10 per page view.
Thanks for your concern about giving credit for answers - much appreciated. Not critical, though - I enjoy the process, so the "points" are gravy.