Stock Screens & Scans for Traders & Investors

As a part time trader & investor, I strictly use end of day data for my screens and scans as I don’t have the luxury of watching the tape all day long (nor do I want to). With that said, I do receive text alerts if a buy signal is made or if a sell signal has been violated. Using my smart phone or tablet, I can and do trade during business hours (when absolutely necessary) but it’s not imperative.

I encourage investors and traders in all time frames to evaluate stocks for investment using both fundamental and technical analysis. A day trader and even a swing trader can get away with avoiding fundamental analysis but I highly recommend both methods of analysis for intermediate and longer term trend traders and investors. Both tools are equally important in making serious decisions with your hard earned CASH!

Let’s start with a list of the key fundamentals that I require to be filtered within my mechanical screeners (please note that you should use your screener of choice):

Simple Fundamental Screener Criteria:
The criteria listed in this section can be used together or arranged in a variety of ways to generate multiple screens containing all possible opportunities. Get a feel for specific screens and determine which are the most successful during certain market conditions.

Most Important Fundamentals:

  • Increasing Earnings (current, past: quarterly, yearly and future estimates)
  • Increasing Sales (current, past: quarterly, yearly and future estimates)
  • Increasing Net Income (current, past: quarterly, yearly)
  • Increasing Institutional Sponsorship
  • Increasing and strong Relative Strength ratings vs. general market

Most Important Price Data:

  • Stocks making New Highs
  • Stocks within 15% of New Highs
  • Stocks trading slightly above or within 5% of the 50-d ma
  • Stocks within 10% of the 200-day moving average (in weaker markets)

Less Important Metrics:

  • Increasing Return on Equity (ROE)
  • Price / Earnings Growth (PEG) – less than 1 is preferable
  • Accumulation/Distribution ratio (up days vs. down days)
  • Up / Down Volume over past several months

Fundamental screeners will scan thousands of stocks narrowing down the universe to a couple dozen to a few hundred each night or weekend. The more bullish the market, the larger the list of stocks will be and vice versa for weak markets. From here, the savvy investor turns to technical analysis to identify “when” and “where” to place a new position for the ideal risk-to-reward ratio.

General Market Metrics & Technical Analysis:

  • Determine if overall market is in a specific trend (up, down or sideways). Use multiple moving averages to quickly determine the trend.
  • Evaluate sister stocks or stocks within the same industry group (strength travels in groups so the probability of success rises when buying into a strong industry).
  • Study the one year weekly chart (preferably candlesticks)
  • Study the six month daily chart (preferably candlesticks)
  • Look for increasing accumulation days (stock up on above average volume)
  • Evaluate the Point & Figure chart for clean support and resistance levels
  • Look for basic chart patterns such as flat bases, cup bases, saucer bases, triangle breakouts, obvious trends along a moving average, etc…
  • Properly forming bases
  • Pivot points
  • Breakout areas
  • Extended stocks
  • Stocks pulling back to key support lines
  • Favorable risk-to-reward setups
  • Check volume action when bases are formed

Market Breadth – Using Screens
It is extremely important to pay attention to the quantity of stocks making your screeners from time to time. The length of the list alone will tell you how healthy or how weak the market currently is, without even checking another factor.

For example, a standard screen of mine searching quality stocks making new highs should be full of candidates during a fresh up-trending market. The list should be full of candidates as long as the trend continues. As soon as this list starts to thin out on a daily and weekly basis, become cautious that the breadth is weakening.

Example of my most successful screens:
When scanning these screens, I will view the stocks in descending order starting with the day’s largest price percentage change and occasionally starting with the day’s largest volume change versus 50-day average.

1. Quality Stocks that are trading within 15% of 52-week Highs

  • Current price is within 15% of the 52-Week High
  • Earnings increasing qtr-over-qtr and year-over-year
  • Relative Price Strength greater than 80% of the general market
  • Current 50-Day Average Volume is at least 100k shares per day
  • % Increase in Volume (Current Day) vs. 50-Day Average Volume: Volume 50% larger than the 50-d average

2. Quality Stocks making New 52-week Highs:

  • Current price is trading at a new 52-Week High
  • Earnings increasing qtr-over-qtr and year-over-year
  • Relative Price Strength greater than 80% of the general market
  • Current 50-Day Average Volume is at least 100k shares per day
  • % Increase in Volume (Current Day) vs. 50-Day Average Volume: Volume 15% larger than the 50-d average

3. Institutional Sponsorship Increasing

  • % of the number of Institutions for Current Quarter vs. Prior Quarter have increased by 10%
  • % of the number of shares owned by Institutions for Current Quarter vs. Prior Quarter have increased by 5%
  • Earnings increasing qtr-over-qtr and year-over-year
  • Relative Price Strength greater than 50% of the general market
  • Current 50-Day Average Volume is at least 100k shares per day

4. Quality Stocks with a new IPO’s within the past two Years

  • Current price is greater than or equal to $10 per share
  • Earnings increasing qtr-over-qtr and year-over-year
  • Relative Price Strength greater than 80% of the general market
  • Market Capitalization is greater than or equal to $100M
  • Current 50-Day Average Volume is at least 50k shares per day
  • % Increase in Volume (Current Day) vs. 50-Day Average Volume: Volume 50% larger than the 50-d average
  • IPO Date within past 5 years (sometimes use 3 years)

Although I run these screens at least once per week, one or two will come into favor while others fall out of favor depending on the market environment or situation. Over time, the strength and weakness of certain screens will also give you a hint as to what the overall market is doing (another breadth signal).

For example, a screen that locates quality stocks making new 52-weeks highs is best used when a market is forming a new up-trend and the overall movement is still fairly fresh. This screen is less important near the end of a strong up-trend because at this point, many of the stocks making new highs are exhausted. The trader will see more failed breakout attempts, reversals and late stage bases so the odds are no longer in favor of this screen.

In strong up-trending markets, one cannot expect to buy every stock that makes the screens so it comes down to developing a risk-to-reward calculation to grab shares in the equities that show the greatest upside.

Lastly, it’s important to understand that no investor is perfect and losses are part of the game when it comes to investing and trading. Most traders will have as many winners as they do losers (using successful screeners) so having sell rules is critical for sustainable success. Learn to cut losses short while letting winners run, no questions asked.

By cutting losses, you account will not blow-up and you will be around to trade another day, especially when your screens are screaming buy!

Identify the Primary Market Trend using The Dow Theory

The correct determination of the direction of the primary trend is the most important factor in successful speculation (trading and investing). The primary trend (also referred to as movement) is the broad basic trend generally known as a bull or bear market lasting a period of time from less than a year to several years. The primary trend is the most important of the three movements discussed within The Dow Theory.

The Dow Theory also includes movements such as the secondary reaction and the daily fluctuations. I am not interested in daily action because these short term movements are typically unimportant.

Edwards and Magee said:

“The Dow Theory is the granddaddy of all technical market studies” and “It is built upon and concerned with nothing but the action of the stock market itself (as expressed in certain “averages”), deriving nothing from the business statistics on which the fundamentalists depend”

The purpose of this post is to highlight the Principle of Confirmation which states that The Two Averages Must Confirm. The authors note that this principle has often been questioned and is the most difficult to rationalize of all the principles yet it has stood the test of time.

They go on to say:

“the fact that it has “worked” is not disputed by any who have carefully examined the records. Those who have disregarded it in practice have, more often than not, had occasion to regret their apostasy”.

Please repeat the following rule several times and learn it, understand it and trade by it:

“What it means is that NO valid signal of a change in trend can be produced by the action of one average alone”.

Here is a chart from the 4th edition of their book Technical Analysis of Stock Trends, published in 1957

Now take a look at today’s Dow Jones and Transports. Do you see any similarities?

Of course you do, the Transports have not confirmed the change in trend along with the DOW. In fact, the $DJIA is now back below the resistance line after this week’s negative action.

Many traders on StockTwits, Twitter, blogs and TV (if you still watch financial television) are miffed about the action of the market over the past several weeks, particularly the past week. Well, the trend hasn’t confirmed so the risk is still high that the so-called “leaders” are setting up for failure or head-fakes.

I’ve started to sound like a broken record with my Dow Theory tweets but if it is fact, it is fact. As traders, we must be patient and wait for the confirmation before loading up on new shares. A trend change may still occur but we must cast a shadow of doubt until both averages confirm.

If you don’t want to listen to me, a lowly stock blogger, at least listen to what Robert Rhea said in 1932:

“The movement of both the railroad and industrial stock averages should always be considered together. The movement of one price average must be confirmed by the other before reliable inferences may be drawn. Conclusions based upon the movement of one average, unconfirmed by the other, are almost certain to prove misleading.”

Please note that “railroads” have been replaced with “transports” in today’s world.

Trading can essentially be broken down to managing risk and as Victor Sperandeo stated, “market forecasting is a matter of probabilities; the risk of being wrong is always present”.

So why tilt the risk against you if history shows us that both averages must confirm for a sustainable change of trend to take place. It’s a wacky world out there but the rules haven’t changed so wait for the confirmation before jumping in with both feet.

Market observation from Thursday, November 17, 2011: The NASDAQ has now flashed four distribution days since the start of the month. This is a red flag and a signal to lock in profits and sell losing positions before they grow in size.

Continue to follow me on twitter for daily tweets, charts and links to great articles.

Webinar: How to Make Money Trading Part Time

My webinar titled How to Make Money Trading Part Time is now posted for viewing by anyone that couldn’t make the live session or for further review.

The webinar highlighted the following topics:

The content covered is a high level overview of how I trade part time while managing a full time career and family as my top priorities. It can be done successfully but there are some key rules that must be followed in order to be consistently profitable.

Take a look and let me know if you have further questions, post them here in the blog comments (the webinar is an hour long with two Q&A sessions).

Workshop slides can be found through this link in PDF format (please note that the chart case studies won’t work properly in static PDF format – the PDF is not interactive):
How-to-Make-Money-Trading-Part-Time

Lastly, I would like to thank Tim Bourquin from TraderInterviews.com for hosting this webinar and giving me a chance to perform this workshop both in person back in February in NYC and on the web.

Review these posts as a follow-up to the webinar, to reinforce the topics that I discussed:

I look forward to the next workshop and/ or webinar, thank you again!

How I Trade – Audio Interview

The below MP3 file is an audio interview I did with Tim Bourquin back in February 2008 for his site, Trader Interviews. The interview lasts about 20 minutes covering topics such as how/ when I started trading, the types of fundamental screens I use each night and the types of charts I study each night for the stocks I am studying to buy and sell.

Click here to Play the Interview:
042111_Trader Interviews 2008-02-28 Trader

I listened to the interview last night and I can tell you that nothing has changed in my trading style since 2008, as far as the core foundation is concerned.

Screens and items I talk about in the interview and still use today:

Enjoy and certainly let me know what you think!

Show notes: Chris Perruna is a part-time trader who holds positions from three to nine months at a time, looking for larger moves in stocks he chooses based on a popular trading system from a leading market newspaper. Here we talk about the three stock screens he uses each night, why he likes stocks that are about to bounce off their 200-day moving average and why he, even though he is a longer-term trader, will get out of a position the same day if the trade isn’t working out. Chris’ blog can be found at: ChrisPerruna.com.

Note: In the interview, I say the words “daily charts” twice when I meant to say “intraday chart” and “daily chart”.

I look at the intraday chart, daily chart, weekly chart and point & figure chart for each stock I analyze (nightly).

NOTE: In the interview, I suggest that my screens are showing red flags as they are very weak. Well, the NASDAQ $COMPQ dropped more than 40% over the next year.

How to Make Money Trading Part Time – Workshop

I want to thank everyone that attended my workshop at The Traders Expo New York:
How to Make Money Trading Part Time

The turnout was fantastic as it appeared to be standing room only within the first 10 minutes of the workshop. I discussed profitable techniques of how to build a successful stock watch list using quality fundamental and technical screening methods in your spare time. Case studies in the form of chart examples were studied interactively to identify and teach how to spot major market trends and successfully trade watch list candidates, both long and short. We discussed how to trade in situations when the odds are in our favor by properly employing risk management strategies such as position sizing.

It was explained that this method exclusively uses after market data which allows you to focus on your career, family, and friends or anything else but a computer during the typical working day. A half hour per night or a few hours on the weekend is all you need to consistently grow your wealth using these techniques.

Workshop slides can be found through this link in PDF format (please note that the case studies won’t work properly in static PDF format – the PDF is not interactive):
How-to-Make-Money-Trading-Part-Time

For Questions, e-mail me at:

In the coming days and weeks, I will be posting the individual slides from this workshop while expanding on the lessons from each.

Until then, review these posts for some of the topics that I will expand upon:

I look forward to the next workshop, thank you again!