How I Scan For My Stocks
November 30, 2006
When I am searching for stocks there are two primary scans I use, after hours. One is a list I have in my TCNet program called “IBD List Combined” and the other one is “Price/Volume.”
The IBD List Combined is simply all the stocks the past week from “Your Weekly Review,” “Where The Big Money Is Flowing-Daily/Weekly,” “IBD 100,” “Top Buys Of Mutual Funds Past Month,” and “IBD Compostie Top 200.” These stocks are all put on one list and scanned for new breakouts after the bell. These stocks are the best of the best and normally when they breakout if you follow the IBD sell rules work quite well. What this list also helps me to do is find potential breakouts that I then place on watchlist on my TWS in IB. These watchlist have alerts set .10 cents above the pivot point of the most recent base and when the stock price crosses that pivot point an alert goes off. That alert will then allow me to pullup current chart of the stock and see if this breaout is on heavy volume. If it does, then I buy intraday, if I am around.
The next scan called “Price/Volume” is a scan I created using criteria from the best stocks with big price runs that I have seen in my life.
The best way to describe this process is by reprinting my submission to TCNEt’s Worden Brothers. The orignial can be found on TCNet. I recommend EVERYONE subscribe to this chart package. Just do some research on it and you will see why it is the best.
The Worden Report (Friday, June 3, 2005)
We Dub Thee Sir Aloha
Sir Aloha is another one of those who put their own marks on every concept that they find attractvie, which they then modify to fit their own objectives. This is a characteristic of ALL knights. Sir Aloha’s approach is one that will help many develop approaches of their own. We welcome Sir Aloha to the “Roundtable of Knights Who Think for Themselves.” The celecbratory bottle of Veuve Clicuot Ponsardin is being prepared for travel. - DW (Don Worden)
Dear Mr. Worden
As a user of TC2005 for at least six years I can honestly say that without your software my success today might not be what it has been. I would like to offer a submission on how to select stocks for purchase during bull markets or, if the investor is experienced, purchase of good stocks in strong sectors in bear markets.
Being an avid fan of historical charts and an avid chart reader, I have noticed the same patterns in charts over and over and over. Being that I have been investing/trading stocks for ten years now I have also seen my fair share of great stocks and their chart patterns. I scan/search around 500 stocks everyday that come up on my PCF (personal criteria formula) easy scans and find that they have a fantastic track record when coming out of a basing pattern.
I look for stocks that have simple characteristics using volume and moving averages. I find technical indicators are just clutter and can give too many false signals that could prevent a trader from earning full potential profits. Below I will list the criteria and the PCFs that I use to put into an easyscan to give the best stocks with the best chart patterns.
First, I want the stock to be up for the day (Price Percent Change today, 0.01 to Max), the stock to be trading above the 50 dma (C > AVGC50), the 50 dma to be above the 200 dma (AVGC50 > AVGC200).
Second, I want the volume to be at least 1.5x the 50 day volume average (V > 1.5 * AVGV50). On one scan I have stocks that have to avg. 100k shares a day for the past 50 days (AVG50 >= 1000). On a seperate one I have one that trades avg. 20k to 100k (more speculative, wider spreads) (AVGV50 >= 200 AND AVGV50 <= 1000).
Now that you have created the scans of the charts you want to look at we need to now look at how to setup your screen.
In the top window I have candlestick price on a log chart, 50 dma, 200 dma.
Second Window: Volume bars and a 50 day volume avg. line.
Bottom Window: BOP and Moneystream.
I love how on small cap stocks that come up on the scan that have proper accumulation/distribution characteristics BOP can be a strong green throughout the base in an uptrending market. ------- I think I should have re-written that to say: I love how green BOP in the base followed by green BOP after the breakout can lead to great price gains in small cap stocks. OH WELL.
The most important part is then knowing your chart patterns. Cup with handlses, saucers, W-bottoms, ascending bases, 50 day moving average bounces, and other historical patterns that the best stocks create.
When combining all these you can find great stocks that will give you better returns than most other stocks in the market. History shows strong stocks get stronger and weak stocks get weaker. Not all the time, but you get my point. -------- That should have said: Strong stocks get stronger in bull markets, weak stocks get weaker in bear markets.
Easy and not too complicated! I have been using this setup for over five years. This is an excellent scan in bull markets to find the best stocks, the leaders in the current or any uptrend environment.
Aloha from Maui,
Joshua
There you go. If you have any questions feel free to post in the comments below.
Next Up: My personal postition management style. This is NOT the best style for almost any trader. It is for experienced traders that know how to handle a lot of positions if he has to. I normally dont hold as many different stocks as I do now. But that is what the market is offering so I do it. I dont deviate from my discipline. Once you do that, you are only going to hurt yourself. Stick to a routine and do it all the time.
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Comments
5 Comments »
Very Interesting! thanks.
For your IBD list are you entering all these stocks manually?
When looking at quater over quater earnings and sales growth do you want to see both rates about the same? e.g earnings %90 sale %100. or do you not care if earnings is %800 and sales is %25( taken from QSFT just as an example).
Yes, I enter all the stock symbols manually. It helps you memorize them.
I dont care what the number is, as long as it is over 20%. Speculative stocks, of course, do not fall under this criteria. But for longer term holds, I want to see 20% or more.
optionsrock said…
I’m looking for a data source that has some tracking of “big buys” sometimes refered to as BOP… any ideas? I feel that for my system this will be a huge directional aid. Thompsons used to have it but sold out… jim
Ok Maui, you’ve convinced me and your style parallels my own, plus/minus a few details. I have to ask, and I apologize if I offend you with this question, but curiosity is killing me! How much money did you start with, and where are you now - ten years later?
When I first started out I had around $20k that was matched by my father’s $20k in 1997. I worked that total up to $800k by 2003. However, I then decided to run the WPT and WSP tours and traveled a lot to Las Vegas where I proceeded to lose $500k of it on sports gambling throughout 2006. I am now working with just under $350k now but the reason for that…if you did not notice is….I LIVE ON MAUI!!!! Honolulu, HI might not be more expensive than the most expensive city in the USA (San Franfreako, CA) but Maui is! My cost of living consistently exceeds $100k a year so it is not easy to make money at the rate that I was. However, now that we finally have a bear market which will lead to a bull, I am now back in a position to hit, God willing, my $1 million target by the end of 2010.
The bottom line is that if I move to TX, my cost of living will be halved and I can become a millionaire much faster. However, I am addicted to surfing (not huge waves though) and the perfect weather of Maui. So for now, I prefer to spin my wheels, than become rich.
I hope this answers your question. And as a matter of fact, I believe this is the first time I have publicly disclosed this information but what the hell…why hide it?
Aloha, Lee!!!