Important Market Scan Filters
Stockscores.com Perspectives for the week ending February 3, 2014
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In this week's issue:
Stockscores Market Minutes Video
This week, I show how to use the Stockscores Market Scan tool for longer term trading set ups, those appropriate for investors who want to check the market weekly or monthly. Plus, my updated analysis based on the important breakdown that happened on Monday.View the video by clicking here. This is an updated video from Friday's given the market breakdown on Monday.
Key Filters in the Stockscores Market Scan
The Stockscores Market Scan tool has many filters that traders can use to identify opportunities in the market in a timely way. By combining the filters, you can focus in on stocks and ETFs that have the sort of chart pattern that you are looking for. Here is a list of some of the more important and useful filters available in the Market Scan and how to use them:
Exchange
Since the US market is more liquid than the Canadian market, I like to search each country separately so I can set a different liquidity threshold. This filter is also useful for narrowing in on the stronger market. For example, when the junior mining sector was hot, I would often focus my scans on the TSX Venture market. If tech is hot, focus in on the Nasdaq.
Sentiment Score
The Sentiment Stockscore is very helpful when seeking optimistic chart patterns. Stocks with a Sentiment Stockscore of 60 or higher likely have rising bottoms and a more predictable chart. I will often use a threshold of 50 or 60 combined with other filters to eliminate the stocks that are in downtrends and fighting pessimism.
Price
There tends to be a correlation between price and volatility so using the Price filter to narrow in on stocks that best fit your desire for volatility is useful. If you want more volatility allowing for smaller position sizes (in dollar terms), focus in on lower priced stocks. The more conservative investor will favor higher priced stocks.
Abnormal Activity
Most strong market trends start with abnormal price movement so this filter is very important when looking for good opportunities on daily charts.
Gain/Loss
Stocks that are moving in the recent past may have good daily or weekly charts. Each week, I like to scan for stocks that are up more than 3% over the last 10 days. At the end of each month, I look for stocks that are up more than 10% over the last 20 days. Combined with other filters, it allows me to focus in on the stocks that have shown the best performance recently.
Support and Resistance
You can scan for breaks of 5, 15 and 80 day support or resistance. I will use these filters to find stocks breaking out, combined with either the Gain/Loss filter or the Abnormal Activity filter.
Abnormal Volume
Abnormal price action is often accompanied by abnormal volume. If you want to be really selective about breakouts, add in this filter to find that strong volume confirmation.
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The market is in pull back mode and has now broken the first important upward trend line. Further weakness is likely in the weeks to come although I do not yet see signs of move in to a Bearish market trend. The US market has more downside potential than the Canadian so here are three US based ETFs that go up when the market goes down:Back To Top
1. SDS
This is a leveraged ETF based on the S&P 500. If this benchmark index goes down 1%, the SDS should go up about 2%. The holdings of the ETF are rebalanced each day to maintain the 2 to 1 ratio so there is some value decay over time (do a Google search for rebalancing of leveraged ETFs for more information on how this works).
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2. QID
This ETF is very similar to the SDS in that it is a two times leverage, inverse ETF. The difference here is that it is based on the Nasdaq 100 index. If you think the Nasdaq market will suffer more than the S&P 500, this is a better one to play.
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3. VXX
This ETF is based on the Volatility Index, an indication of the premium paid in the market for short term S&P 500 index futures. It goes up when people are willing to pay a higher price for insurance against price volatility and tends to perform well during times of fear. A great short term trading tool but it should be watched closely.
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References
Get the Stockscore on any of over 20,000 North American stocks.
Background on the theories used by Stockscores.
Strategies that can help you find new opportunities.
Scan the market using extensive filter criteria.
Build a portfolio of stocks and view a slide show of their charts.
See which sectors are leading the market, and their components.
Disclaimer
This is not an investment advisory, and should not be used to make
investment decisions. Information in Stockscores Perspectives is often
opinionated and should be considered for information purposes only. No
stock exchange anywhere has approved or disapproved of the information
contained herein. There is no express or implied solicitation to buy or
sell securities. The writers and editors of Perspectives may have positions
in the stocks discussed above and may trade in the stocks mentioned. Don't
consider buying or selling any stock without conducting your own due diligence.
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