Next we'll cover off the simple scan of looking for symbols with an SCTR between 60-65 within our strong group. Remember, in order to be considered for this scan, the symbol had to be better than 75% at one time to get into the group. Now we are looking at them as they show a little weakness. This is the best way to control that we are not finding stocks that are just middle of the pack stocks.
So this is a relatively simple scan. We want to find the stocks within our 6020 chartlist that at one time were in the top quartile stocks. Now they have pulled back compared to the rest of the stocks in the SCTR group. So, while the stocks may not be soaring right now, we can use these times to find candidates that might make a run very soon.
So here is the meat of the scan. What this asks is for stocks sitting in the 60-65 level on the SCTR.
[favorites list is 33] // 6020 SCTR GREATER THAN 75 SCAN
and [SCTR > 60] and [SCTR < 65]
You can add the title as a comment line.
You can title the scan 6024.1 Strong Stocks With An SCTR Pullback.
Then add comment lines to create the description.
I will not be buying these stocks while they are at this level, but I want to set alerts to notify me if they should rise to a price that would merit my attention. Again, we want the institutions to start buying them. The moment they do, I want to try to ride the surge higher.
A Weekend Scan.
The next scan that can be interesting is this same scan with different numbers. If you have time on a weekend or just sit in front of a tv show and flip through stocks on your iPad, this can give you a nice look at stocks in interesting zones.
While the 60-65 scan above is going to show strong stocks that have dropped to a lower level, it will produce a small result. This scan is going to be a weekend summary of interesting stocks. Obviously, change your favorite list number to your own 6020 list.
[favorites list is 33] // 6020 SCTR GREATER THAN 75 SCAN
and [SCTR > 75] and [SCTR <80]
Add your title and comment lines. I am calling this the 6024.2 Weekend Scan.
Deeper Pullback Scan.
The next scan is tailored towards stocks that have pulled back below the 50 DMA and are starting to turn higher. It will not catch them all, but when institutions get a chance to buy strong stocks on a pullback, they like to put money to work. Well the 50 DMA can be an attractive entry for them.
OK, one thing to note. The arrow that takes place well below the green 200 DMA line is not something we are interested in. But this MA crossing criteria is what we are trying to hunt for. Notice the SCTR is well below 75 at the time. The areas in August and in November are interesting. If you can get the timing right, these can be attractive entry points. We have plotted the alignment of the 10, 15 and 20 day moving average after it has been a strong stock, that has pulled back below the 50 DMA 5 days ago. When the moving averages move back into a positive alignment, we want to try to buy the stocks there. Note the SCTR gets excited as it moves above the 200 DMA. So as the 15 DMA moves above the 20 DMA, we want to look to buy the stock with a very close stop should it fail and go back below the 50 DMA.
Notice the price action in May had moved so much to create the positive cross, it would have been a difficult entry even if it was above the 200 DMA. Most of the price gain had happened as you were already up 10%. There was also a positive cross in July that rolled right back over. The one in late August had the positive price movement we wanted and it had just moved above the 200 DMA. Now in November, the SCTR ranking has been above 75. That gets it an entry into the strong stocks club. This pullback to the 50 can be very potent. It can also fail. But the scan is looking for a place that institutions would like to add to positions.
If it fails back below the 50 DMA, sell. You can always find another stock that takes the alignment and does not hurt as much. If it can't maintain above the 50 DMA, we may have to let it go.
These are the components of the scan.
// 6024.3 Moving Average Butterfly Near The 50 DMA
// Select your favorites list number. Mine is 33.
[favorites list is 33] // 6020 SCTR Top 25% List
// price is above the 200 DMA
and [close > SMA(200)]
// Price pulled back below the 50 DMA
and [5 days ago Close < SMA (50)]
//The slope of the 10 DMA is positive
and [slope (10) > 0]
//the slope of the 15 DMA is positive
and [slope (15) > 0]
//slope of the 20 DMA is positive
and [slope (20) > 0]
//The 10 DMA is above the 15 DMA
and [SMA(10) > SMA (15)]
//the 15 DMA will be crossing above the 20 DMA to complete this scan, so we watch for the 15 DMA
crossing above the 20 DMA
and [SMA(15) x SMA (20)]
// end of scan
You have probably had enough on scanning. With all that scanning , the next chapter will move out of scan methods and look at stocks in the scan results. How do we decide which ones are not for us to invest in on pullbacks?
Let me know how SCTR's are doing for you. I have had some tremendous testimonials so hopefully you are finding the magic in the scans.
Good trading,
Greg Schnell, CMT
