How to Use the Stockscores Indicators
Stockscores.com Perspectives for the week ending April 27, 2015
In this week's issue:
In This Week's Issue:
- Stockscores Free Webinars - Active Trading and Investing this week
- Stockscores' Market Minutes Video - Buying Stocks on Sale
- Stockscores Trader Training - How to Use the Stockscores
- Stock Features of the Week -
Stockscores Free Webinar - The Stockscores Approach to Active Trading
Tuesday April 28 - 6:00 pm PT, 9:00 pm ET
Learn the essential concepts to day and swing trading with the Stockscores Approach. Stockscores founder Tyler Bollhorn will demonstrate the tools and processes that he uses to find short term trades. Plus, learn the economics of active trading and what it takes to make it a career.
Click Here to Register
Stockscores Free Webinar - The Stockscores Approach to Investing
Thursday April 30 - 6:00pm PT, 9:00 pm ET
Stockscores founder Tyler Bollhorn will highlight how he scans and analyzes the markets for longer term trades suitable for the investor managing their own portfolio.
Click Here to Register
For a complete list of upcoming webinars, go to www.stockscores.com/webinars
Stockscores Market Minutes Video - Buying Stocks on Sale
Buying stocks that have gone down recently is only a good idea in a specific situation. This week, I show how to buy good stocks that are on sale plus provide my regular weekly market analysis.
Click Here to Watch
Trader Training - How to Use the Stockscores
I developed the Stockscores indicators as a way to take the six important elements of chart patterns and put them into a pair of indicators. These indicators are available at Stockscores.com for almost all North American stocks and are very helpful for doing an assessment of whether a stock is worth considering.
Here's how the Stockscores indicators are calculated. Every stock, index or ETF that Stockscores covers is given 50 points to start. Points are added for positive chart characteristics and deducted for negatives.
For example, a break through price resistance is an indication that buyers are stronger than sellers, so the algorithm awards points when this happens. A downward-sloping moving average is a sign that the sellers are in control, so points are deducted when this happens.
I created the algorithm with about 15 different metrics that can be measured from market activity, each awarding or deducting points based on whether that metric was a positive or negative signal of future price direction.
This algorithm defines the Signal Stockscore, which tends to bounce around quite a bit. To smooth out the line, the system then calculates a seven-day exponential moving average of the Signal Stockscore to produce the Sentiment Stockscore. This is the important number to watch.
A Sentiment Stockscore above 60 indicates that investors are generally optimistic about the stock, index or ETF. A score below 40 indicates the market is pessimistic. The sweet spot is to find Sentiment Stockscore lines, which can be seen on any Stockscores.com chart, sloping upward and crossing through 60. You should then look at the price chart to see a confirming price pattern where the stock price is moving up through resistance from low price volatility.
I don't recommend buying a stock just because its Sentiment Stockscore is 60 or higher, but I do find that strong, market-beating stocks tend to have good Sentiment Stockscores early in their trend. The Stockscores indicators are a great way to provide a quick reference for the strength or weakness of a stock.
You can check the Stockscore for most North American stocks, ETFs and indexes by entering the symbol in the upper right corner of the Stockscores.com website. The Stockscore algorithm requires 200 days of data to calculate the Stockscores indicators, so newly listed companies will only display a chart and not the indicators.
You can review the charts of any North American stock and see the Sentiment Stockscore for free. Just enter the symbol in the box at the upper right of the site. Canadian symbols require a prefix: "T." for the TSX and "V." for the Venture. Members can use the Sector Watch to see what areas of the market are strong and the Market Scan to screen the market for stocks with good Sentiment Stockscores or perhaps those that are just crossing above 60 today.
It's important to remember that the Stockscores indicators are applied to daily chart data and are not useful for a shorter time frame. A stock may give a good entry signal on the intraday chart suitable for day or swing trading despite having a weak Sentiment Stockscore.
What's powerful about the Stockscores is that they allow you to use a computer to filter the market, seeking out stocks with optimistic chart patterns. Stockscores.com has a Market Scan tool for filtering a large universe of stocks in search of stocks that meet the filter criteria you establish. It's hard for a computer to look for chart patterns the way a human can, but the Stockscore is helpful because it attaches points to the different elements of chart patterns.
Here is a link to a video in the Getting Started area of the Stockscores Education Center which explains the Stockscores Indicators as well.
Click Here to Watch
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Today, I ran the Abnormal Breaks Canada Market Scan in search of stocks making statistically significant breaks to the upside. These price moves, after a period of low price volatility, often signal the start of an upward trend. The key is focusing on those with a good chart pattern before the abnormal price action.
Here are two stocks that have decent charts and are worth considering:
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1. T.AVL
T.AVL also trades on the AMEX with the symbol AVL. The stock broke up from a rising bottom and has recently broken its long term downward trend line. Could be a turning point here. Support at $0.28.
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2. T.SGY
T.SGY gapped up and made a strong gain today through resistance, from a rising bottom on the daily chart. Volume was strong in support of the price action, looks like a good candidate to enjoy a turnaround. Support at $3.60.
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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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