Rolling over. The short term technical picture shows the markets rolling over right now into a new down leg. The key test will be when the Nasdaq tries to move below 1900 this week. Right now, most technical signals point to much lower prices if that occurs. John Murphy and Arthur Hill have more on the possibilities later on. But first...
SCANNING FOR CHANNELS - TAKE 2
Last issue, I showed you several techniques for creating scans that find stocks that have been moving sideways in a channel between two fixed price levels. But what about stocks that are moving sideways between other price levels? If you're scan is looking for stocks that are stuck between 30 and 40, you won't find stocks that are moving sideways between 80 and 90. Depending on what kind of trading you want to do, that can be a big problem.
The solution is to use percentage-based channels instead of fixed-price channels. A percentage-based channel scans looks for stocks whose maximum high is within a certain percentage (5% for example) of its minimum low for a given period of time. For example, using our Standard Scan interface, you'd create a scan that looks like this:
Notice the "1.05" in the Multiplier field? That's how we indicate that we want to find stocks that have been moving within a 5% channel. If we wanted to use a 2% channel instead, we would enter "1.02" into the Multiplier field.
While that scan will do the job, there's still a problem. It turns out that lots of very low volume stocks get returned by percentage-based channel scans. To eliminate those stocks from the scan, we can add another filter that ensures the Minimum Volume for the same period is greater than zero. Here's the final version of our scan:
THE "WITHIN" PROBLEM
Scan Engines are designed to find charts with a specific set of technical criteria on a specific date. Occasionally, we get a question from someone who is trying to use the scan engine to find stocks with a specific set of technical criteria over a range of dates. We call this the "within" problem since they are looking for something that happened "within" a certain time period. For example, "Show me all the stocks that had a MACD crossover within the past month."
The reason our scan engine doesn't support these "within" scans is because you cannot use them in a real-world trading environment. From a high-level perspective, the purpose of scanning is to develop scans that can help you decide which stocks to buy or sell "soon" - i.e. before the data used in the scan changes significantly. The standard scenario is to run your scans after the market closes in preparation for placing orders early the next day. While some of the results from a "within" scan may still be valid, others results may have become invalid by the time the scan is run and, what's worse, you cannot easily tell which is which.
We strongly recommend refining a "within" scan so that it refers instead to "today". For example, take the scan above and turn it into "Show me all the stocks that had a MACD crossover today." You can then use the "Starting" field (at the top of our scan interface pages) to see the results of the scan on any previous day you choose.
Again, the message here remains the same - when scanning, start simple, follow the examples, and experiment. Learning to use scans effectively is not that hard, but it does take time and effort. The rewards can be substantial however so stick with it and let us know how it goes!