How to Use the Stockscores Indicators
Stockscores.com Perspectives for the week ending August 29, 2016
In this week's issue:
In This Week's Issue:
- Stockscores' Market Minutes Video - Missed Trades - Process or Judgment?
- Stockscores Trader Training - How to Use the Stockscores Indicators
- Stock Features of the Week - Day Trading the Intraday Pullbacks
Stockscores Market Minutes Video - Missed Trades, Process or Judgment?
Every trader should review the trades that they should have traded using their strategy. Then, identify why some trades were missed. That topic plus my regular weekly market minutes video and the trade of the week. Click Here to Watch To get instant updates when I upload a new video, subscribe to the Stockscores YouTube Channel
Trader Training - How to Use the Stockscores Indicators
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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Day traders can use the Stockscores Market Scan tool to help build their watch list, even though the Market Scan does not run in real time. Active traders can run the DayTrader market scan strategy about 45 minutes after the open and the monitor the stocks that appear on that list using a real time charting program, looking for entry signals from one of the Stockscores Active Trader strategies.
The Stockscores Active Trader strategy rules and processes are taught in the Active Trader course, learn more by clicking here.
Here are three stocks that worked well today, these are the daily charts, Check the intraday charts on Stockscores.com to see the intraday pattern set ups (my newsletter creation tool does not allow me to show the intraday charts, sorry!)
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1. SPU
SPU made an intraday pullback play (IPP) entry signal at 11:50, earned about 3 to 1 reward for risk by the close.
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2. OSUR
OSUR did an IPP at 10:52 and topped out at 6.5RR before closing at 3.5.
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3. TTWO
TTWO did an IPP at 10:24 but only mustered at 0.6RR by the close.
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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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