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!

Stocks near 200-d MA Support

The following spreadsheet consists of 175 stocks that are trending back towards their 200 day moving average while maintaining strong relative strength. It’s essentially a screen of the stocks that have potential to catch support at the 200-day moving average and lead the market IF (a BIG “IF”) it decides to resume the up-trend.

I’ll narrow down this list of 175 to 10 – 20 of the best, technically, in my opinion (later this week).

Take a look:

Stocks to Watch: April 3, 2011

This post contains weekly charts of several interesting stocks that I am following personally and on twitter (disclosure: I own shares in more than one). Each of the following stocks have been trending higher on above average volume.

$LOGM – 46.08
$MOBI – 12.85
$NXPI – 30.59
$SODA – 46.80
$SVN – 21.83
$MMYT – 30.99

Let’s see if the $DJIA and $COMPQ will cooperate by maintaining the up-trend. Both are showing some signs of exhausting but we’ll trade what the charts are doing, not what we think they may or should be doing.

Strong Stock Charts

Today’s screen features quality stocks with increasing institutional fund sponsorship and charts with trends moving higher (trading above key moving averages as well). Not many interesting stock charts exist in this market but I can say that these look strong when compared to peers.

The stocks also meet the requirements below:

  • Earnings per Share (EPS) Rating: Increasing quarter over quarter
  • Relative Price Strength (RS) Rating: 60+
  • % of the number of mutual funds owning for current quarter vs. prior quarter: Increased by 10% or more
  • Stocks trading at new 52-week high or within 15% of 52-week high
  • 50-Day Average Volume was greater than or equal to 100% (Friday’s market)

Stock charts listed in alphabetical order:
(ACET), (AIPC), (CFFN), (COCO), (COGT), (DSCP), (EBS), (ENSG), (EZPW), (FCFS), (INSU), (LHCG), (LPHI), (MYGN), (THOR), (TSYS)

[Read more…]

Basic Materials (Oil) Stocks Making New Highs

Only thirteen stocks made my new highs screen based on specific criteria as described in this post. Of the thirteen stocks, half were from the oil and gas industry which tells me that it’s a short term leader during any up-trends in the recent market downturn. Steel and iron, specialty chemicals and synthetics were also among the few stocks making new highs on strong looking charts (when compared to recent beaten down leaders).

Each of these industry groups fall under a broader sector labeled “basic materials”. It couldn’t be clearer as to where the smart money was throwing funds today as volume spiked across these industries and especially among the stocks making new highs.

I understand that recent market leaders such as AAPL, BIDU and JASO (up more than 12%) were also higher today but they are still far from new 52-week highs and some are still under key moving averages such as the 50-day.

Basic Materials: Independent Oil and Gas, Specialty Chemicals, Steel and Iron and Synthetics flexed their muscle today and the stocks below were among the few making new 52-week highs. Making new highs after the recent market downturn speaks volumes for the relative strength of these stocks. Several of them are extended from ideal entry points but do not leave these off any near term watch lists on the long side.

Trade the trends – one of the simplest methods to make money in this world. I am not calling for a bull market but these stocks have support from the smart money and I have no problem jumping aboard even if it only last a short while.

Stocks hitting New Highs Monday on Strong Volume:

  • MTL – 111.60, Mechel Steel Group was up 10.60% on volume 97% larger than the daily average
  • EOG – 98.43, EOG Resources was up 4.58% on volume 112% larger than the daily average
  • SWN – 61.87, Southwestern Energy was up 6.54% on volume 63% larger than the daily average
  • RRC – 59.61, Range Resources was up 4.82% on volume 19% larger than the daily average
  • NEU – 60.97, Newmarket Corp. was up 3.90% on volume 341% larger than the daily average
  • KWK – 32.03, Quicksilver Resources was up 7.48% on volume 21% larger than the daily average
  • CCC – 18.09, Calgon Carbon was up 8.13% on volume 148% larger than the average
  • WMS – 39.85, WMS Industries was up 3.45% on volume 65% larger than the daily average

Study the charts as they are among the best looking in today’s market. It’s hard to buy new highs, especially in this weak market environment but if you must buy long, think about these candidates.

021108_mtl_wkly.png

021108_eog_wkly.png

021108_swn_wkly.png

021108_rrc_wkly.png

[Read more…]