Scanning for cross-overs is a simple concept that all Scan Engine users need to master before moving on to the more difficult techniques. There are four different kinds of cross-overs. Let's look at each of them:
(Note: All of the examples in this article are meant for use with the Advanced Scan Workbench.)
1.) The Price Cross-over
A price cross-over happens when a stock's price moves from one side of a price overlay line to the other. A great example of this kind of scan signal is when a stock's price moves above its 200-day moving average. Other examples include prices crossing above the upper Bollinger Band or one moving average crossing above a different moving average. The same technique can be used to scan for Parabolic SAR signals too. As with all cross-over scans, the key is to realize that the scan actually contains two different conditions. For a cross-over to happen, the stock's price must be below the overlay line on one day and above the overlay line on the next day. Breaking that down into statements that the Scan Engine can understand results in something like this:
[Yesterdays close <= Yesterdays SMA(200)] and [Todays close > Todays SMA(200)]
Because cross-over clauses are so common in scans, we've added a special comparison operator that reduces a cross-over scan to just one line. Using the "crosses above" operator ('x'), we can also write the above scan like this:
[close x SMA(200)]
Much simpler don't you think? In English, you read the above scan as "Today's closing price crosses above today's 200-day simple moving average."
2.) The Constant Cross-over
A constant cross-over happens when an indicator moves above or below a specific level. An example of this kind of cross-over is a when the RSI moves above 50, the center line for that indicator. Other examples include an indicator moving above a predefined over-bought level or below a predefined over-sold level. Again, we can use the "crosses above" operator like this:
[RSI(14) x 50]
Read this as "Today's 14-day RSI crosses above 50."
3.) The Signal line Cross-over
Many technical indicators come with a second line that serves as that indicator's "signal line." The signal line is usually a short-term moving average of the underlying indicator. A signal line cross-over happens when those two lines cross each other. A common example is when the thick black line on a MACD plot crosses above the thinner signal line. Other indicators with built-in signal lines include Stochastics, Rate Of Change, On Balance Volume, and Accumulation/Distribution. Here's what a signal line cross-over scan looks like:
[MACD Line(12,26,9) x MACD Signal(12,26,9)]
If the indicator that you are using doesn't come with a built in signal line, you can use our Advanced Scan Interface to create your own. For instance, here is a signal line cross over scan for the ADX indicator that uses a 7-day simple MA as the signal line:
[ADX Line(14) x SMA(7, ADX Line(14))]
4.) The Cross-under
So now we've seen how to use the "x" operator to create "crosses above" style scan clauses. But what if we want to scan for situations where one line moves below another line? To create a "crosses under" scan, simply create the equivalent "crosses above" scan and then switch the two expressions on either side of the "x" operator. For example:
To find stocks that have moved below their 200-day average, change the scan we created in section 1 above into this:
[SMA(200) x close]
To find stocks whose RSI has just moved below 50, change the scan we created is section 2 above into this:
[50 x RSI(14)]
...and so on.
I hope this will help you create successful cross-over scans using the tools on StockCharts.com. I encourage you to play with these four techniques until you've mastered them. They are both simple and powerful and can help you find lots of great charts to watch no matter what the market conditions are.