Sometimes a stock takes on a life of its own, and trends smoothly for days on end. All we can do is search for these stocks, and trade with care, since we do not know exactly how long they will continue to out-perform the market. The Chande Trend Meter is a powerful tool for finding such stocks, and here is a simple scan code to look for such stocks.
The Scan Code
Chart 2: Simple scan code for CTM scan
This simple scan code, similar to the one in the SC documentation, uses a simple moving average of the Chande Trend Meter to rank stocks. It does not impose any other conditions. Naturally, you can change the length of the moving average to suit your trading horizon, and set your portfolio to the stocks or ETFs of your interest.
The results of the scan, shown below, have MORN at the top of the list. A chart of MORN in shown in Chart 1, and looking at it, perhaps we can agree that it has moved very smoothly over the past several weeks.
Chart 3: Results for Chande Trend Meter scan.
Once you have a list, you can trade on a short-term or long-term basis using trend-following strategies with the usual caveats. Naturally, you can wait for a pull back or analyze chart features to drive your trading as you wish.
Talk of Trade Wars Trips Industrials
Trade war talk has tripped up the Industrials from levels above 25,000 (see Chart 4 below). Boeing and Caterpillar have borne the brunt of the selling. Nobel laureate Paul Krugman has an excellent analysis of worst-case scenarios for GDP changes. The effects are not negligible, but the emotional toll on traders seem to be greater than potential GDP declines.