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Using Momentum and Relative Strength to Find Stocks for You! (01.11) | Chip Anderson | Deep Dive

Using Momentum and Relative Strength to Find Stocks for You! (01.11) | Chip Anderson | Deep Dive
Hello everybody. Welcome to

Deep

Dive

. I'm your host

Chip

Anderson

. You probably just saw me on the previous show but I'm here again and I'm now live working with my good friend Rachel. We're gonna be showing you the in-depth features of StockCharts in this show. I really really love this show it lets me

dive

into some some really important areas of the website that I don't normally get to talk about in the overview shows. So today's topic is

using

momentum

and

relative

strength

to

find

the best

stocks

for you. So we're going to talk about how stockcharts.com can be used to

find

stocks

you might want to actually invest in you might want to buy and then show you why those

stocks

will be interesting to you and how you can take your criteria and kind of put it into the StockChart system so that StockCharts will automatically

find

those

stocks

for you. Again just got a couple of FAQ is about this show it's the same as always we are recording this you can go

find

it up on YouTube soon after the show is over but right now the show is live so we have the little Slido chat box that's out and available to the right side of the video and you can use that to talk to us during the show in fact we'd love to hear from you like I said I have my good friend Rachel with me if you're if you'd like to please type a little hello message to Rachel in that box but as I'm talking let me know if you have any questions if there's something that...
using momentum and relative strength to find stocks for you 01 11 chip anderson deep dive
I kind of glossed over or went too quickly on, absolutely I would love to be able to answer that show during the hour that we have together. Do keep in mind that I have to stay on topic I know there's like a zillion things in StockCharts we could talk about but in this case make sure that the question has to do with the with the topic that I'm presenting today and then the slides that I'm showing you right now on the screen I've created a PDF file for that and you can download that PDF file if you want there's the URL I know the numbers are a little tricky here but it's a

deep

dive

-all lowercase- 20 for 2020, 01 for January and 11 for January 11th so, so that's what the numbers mean and I think you'll be able to type all that in and download that PDF file you can do that right now and follow along or you can do it after the show just to see what's going on so again during the show today I want to really talk to you about the technical investing process. Technical analysis is about helping you

find

opportunities that really are tailor-made for you and that not necessarily anybody else is talking about and the key thing here, the thing we're going to be

using

a lot today, is the scanning engine it's going to help you

find

stuff that nobody else knows about and that's that's going to be some some very valuable stuff. So think about that the goal as an investor especially a technical investor is to sort through that 100k or plus...
using momentum and relative strength to find stocks for you 01 11 chip anderson deep dive
however many ticker symbols it is that we have these days in our database and

find

the small number maybe five, maybe ten, maybe maybe one or two, that you might actually pull the trigger on. So this is especially true for somebody who's sitting in cash obviously if you've already have your money invested then this is not for that, this is for the situation where you've you've taken some profits you have some some money you want to get back into the market which stock do you want to to play. The stock market is like a casino with you know a hundred thousand different machines a hundred thousand different games going on so we want to get you connected up with the the one that is most likely or most compatible with you and your investing style let's say. And remember scanning is all about the right edge of the chart it's all about

find

ing the technical setups that you think increase your odds of investing success and I'll add to that sentence to

find

ing those things right now as of as of the current moment in time and so let's talk a little more about some of those those terms that I used in that particular phrase so what is a technical setup and specifically so a setup is a collection of technical signals that will occur before you were willing to buy a stock. Remember when when I say technical signals I'm

using

the technical term for technical which means these are signals that have just to do with price, looking at the price and the volume...
using momentum and relative strength to find stocks for you 01 11 chip anderson deep dive
in the price history and the volume history of the stock. So there may be some calculations that are done on price and volume but but the bottom line is price and volume are the only bits of input that kind of go into these signals and so they're very kind of un-opinionated they are they're just looking at the numbers and that's all. They're applying the calculations and giving you advice based on that those calculations so technical signals don't have a lot of bias one way or the other instead they're giving you information that you want to then be able to use to to narrow down your choices. And a technical setup is a collection of those signals now and to be specific a signal is when on the technical chart something crosses something else, when you have two lines and they're crossing either above or below each other or maybe something's crossing the zero line, maybe something's crossing the price that you bought it at those kind of things are technical signals and as an example and this is a very very simple example technical setups as I'll show you are a little more complex than this. A lot more complex than this but simply maybe you only buy

stocks

that are priced between $10 and a $100 and they have an RSI a technical indicator called the RSI value that has just climbed above 30. So so this would be somebody who's just looking at a single technical signal for

stocks

in a particular range. Again that's that's very simple...
but but that is a setup that absolutely is a setup Now the thing about setups is there's no perfect setup that I can give you. Setups are all or they're very personal and they're also about building trust. You have to you have to believe in the setup and you have to customize the setup to fit your particular approach and what works for one person may not work for somebody else. You're trading goals you're you're tolerant, your ability to tolerate risk, the amount of money you have in your account, the amount of experience you have looking at charts and dealing with different indicators and familiarity with those indicators. The amount of time you have to monitor all this stuff that varies greatly from one investor to the next obviously some people are gonna are doing this for a living they're doing everyday they're watching the market like a hawk. They're gonna be

using

very very different setups than somebody who maybe only looks at it each evening or maybe only looks at it during the weekends. So and again all those other factors come into play. So it's very very difficult to say that there's a perfect, the perfect setup for one person is going to be the same work just as well for a different person and so we believe that you want to be customizing -heavily- these setups. They're going to be developed

using

trial and error. This is a process, it's not a it's not a goal that's easily attained it's a process and...
in fact it's a process that never ends you're gonna be constantly tweaking updating and changing these setups as the market changes. So the idea is you start

relative

ly simply with a simple setup we're going to talk about some of that today and I'm going to give you some some ideas for creating some starting points and then you're going to through trial and error and iteration, you're going to improve those results you're gonna you're gonna see if they really do give you what you want and then you're going to continually watch them and try and make them better. Remembering of course that they'll never be perfect, first point, second point is there are no black boxes, we believe strongly that you need a human needs to be involved in making the final decision on all the stuff. Automated trading systems, maybe they're coming, but in terms of an average investor that's really not going to be the right way for you to go because you just don't have the expertise required and even so, black boxes are always going to be challenging. We think it's much much better to have the have a system that gives you a small number of

stocks

for you to review and then you make the decision on the final decision on to buy when to buy when to sell so reviewing the results we think is super important. Alright there's a bunch of those soap boxes we want to make sure I get all those out of the way but they are they are important. So the next...
question is what are we looking for and this is super important what kind of chart what kind of price action should a stock that you're willing to pull the trigger on have beforehand and what's important to understand here a couple important things, one is that there's no way that anybody will pull the trigger right when a stock turns. The ability to pick a bottom on a stock exactly is really really really difficult, clearly, and most most of the time if you pick the exact bottom that's just going to be pure luck. What a lot of people generally are shooting for is

find

ing a situation where something has recently turned around and has a good chance of continuing to go higher but, the point is in order for you to to buy a stock that's a recent turnaround and is going to move higher you have to start by look seeing a chart that looks like this and I have many people, especially people that are new to charting, you might look at a chart like this and go I will never in a million years buy this stock this looks terrible, this stock has been breaking down, it's all the indicators have sell signals on them. Really really not looking very positive. I will however note that there is a positive technical signal here on this chart. Now normally you're going to be

using

more than one signal I'm trying to simplify my presentation today so I'm only going to be showing you stuff with fairly simple signals but do recognize that in the real world there will...
be more than just the one but anyway here's it this is the RSI indicator we'll get into it in more detail in just a second and notice that it is crossed above 30 so the day before it was below 30 and in fact it had been below 30 on this chart all the way back to December as you can see but on this particular day it has moved above 30 giving potentially a technical signal and so there's some some reason, a little reason for hope. Honestly you won't, you probably want to look for a little more before you'd actually but pull the trigger and I have clearly um picked that one that particular stock for a reason kind of in hindsight. I'll show you, I'll show you the result in just a second but but I just wanted to give, to get you start started to get you thinking about that particular chart. Before I go and show you the actual what really happened with that stock, let's talk for a second about the RSI. It's one of many technical indicators that we have on StockCharts.com, it is one of the more popular ones, it's kind of one of our default indicators if you don't configure your account differently, you will see the RSI and most of your charts the the name is the

Relative

Strength

Index but that is misleading it's

relative

strength

is an is a term that's usually used when you're comparing one stock to a whole group of

stocks

or to other

stocks

. In this case

relative

strength

it isn't meaning comparing it to other

stocks

, it...
means it's comparing it to itself just in the past. So this was when it was created it was created by a very famous technician named Welles Wilder. He basically wanted to come up with something that would give you a sense of whether the stock was improving

relative

to its past performance and so he called it the RSI but again then at that, since since then the

relative

strength

term has been used for other stuff and so the name can be a little conf

using

. It is a bounded oscillator meaning that goes back and forth up and down and it will do that a lot but it is bounded meaning it can have values that are only between 0 and 100 it can never go above 100 it can never go below zero and in fact in order for it to get anywhere anywhere between say 95 and 100 the stock has to do some really kind of crazy things and same for between 5 and 0. Most of the time it's been, it spends, a stock will spend its time with an RSI value that's between 70 and 30, if it goes above 70 that's considered to be overbought and if it goes below 30 that's considered to be oversold. Those are, again, fuzzy terms they're not specific terms per se and those levels could change, the level 70 and 30 were picked by Welles Wilder when he designed the indicator but some people want to use 25 and 75 or other other things and those are completely fine. But 70 and 30 are the normal standard levels and then finally, the indicator self takes a single parameter which is the number of periods...
it's the look-back the number of days on a daily chart or the number of hours on an hourly chart so on and so forth that are used in the calculation. When Welles Wilder developed the indicator and presented it he used 14 and that has become the default value for the parameter but it doesn't have to be that it can be it can be anything else I have talked about in previous episodes about how you can use something called the ribbon technique to learn if there's a better value for you. Maybe you can go back and

find

those in some of the archives but will you for the rest of this we will just use 14. I'm not gonna I'm not gonna muck with that we're gonna use 14 for the rest of this show. So let's go back to our chart and here's what happened back when I when I first presented this actually presented this chart back in an older show that I did back in 2015 I think 2016 but it was in and you can see during that time the chart had after turning around and giving that signal things continued to improve for this particular stock and it was up almost 35 percent at that point and I went back the just the other day and looked again at that entire situation it ended up moving up 70% from it's absolute low and then later it moved up to 100%, it regained everything it lost in that

deep

dive

back in December and for anybody who was able to recognize this move and ride these ride this move that's great that's exactly what a technical investor is...
trying to

find

. It's not easy, clearly, and there were, even even on this chart there were ups and downs you would had to have some some staying power to stay in the stock during that kind of wild ride and you would have had to known to get out there in May because if you expanded this chart further you would see that the stock moved lower, in fact much lower after this period of time but again a technical investor is looking for situations where a stock is going to go up they'll ride that until that particular move has, becomes weaker and then they will look to get out and so this is this is the kind of moves that a technical investor is looking for and and hopefully can ride. As I mentioned this is a deliberately simplistic example I'm not here and I don't, please don't get the message from me that the RSI is the only indicator you need to do and you just need to buy when it crosses above 30. I'm

using

this as a very simple example that that advice would usually be very bad advice but again we can now see this is an example of a technical setup and how that particular technical setup if we'd found it at the right time and traded it properly we could have made a nice bit of profit. So let's let's now think about more technical setups so again I just one more time in order to ride those trends higher you have to be willing to pull the trigger when the chart looks like this. Not necessarily when the chart you know has already gone up a bunch...
so that can be very, that can be very challenging. Anyway so again the bigger question looking at the bigger question again is when you think you have a setup when you think you are interest when you

find

some technical signals that are interesting and you want to make them into a setup you have to think about well okay what other

stocks

meet that same technical criteria and are all of them going to then behave in a way that is would be profitable or is it just this one stock behave this way and all the other

stocks

with that signal didn't. So in this case we were looking again at the RSI moving from below 30 to above 30 after it was below 30 for quote-unquote a while and so let's talk about that and let's turn that into something that the scan engine did, a feat that our StockCharts account can use. So just breaking that down a little more and this this of this process of breaking down something you see visually into something that you can describe to the scan engine this is a skill you need to develop. So in other words what we're saying is we want a situation where any chart, we want to see any chart, where the RSI value of for today right now is greater than 30 but also where the RSI value for the previous three days was less than 30 and three is arbitrary, you could make that five you can make it ten however many you want to do, the more days obviously the fewer results you're going to get back. So and that in turn breaks down into two statements that...
we can now turn into and and give to our scan engine. Today's RSI with the parameter of 14 greater than 30 that and greater than sine 30 and starting yesterday the maximum for the previous three days of the RSI was less than 30. So in other words look at the previous three days starting yesterday and going the day before and the day before that. Get the RSI values from each of those three days,

find

the largest RSI value of those three days and if the largest RSI value of those three days is still below 30 that means that the RSI itself has been below 30 for all three of those days and that's exactly what we're looking for. Hopefully that makes sense we have other shows about scanning and trying to and all the specifics of scanning plus I'm going to give a demo here in fact in just a second but that it's a very very common, this is a very common kind of scan so I'll make sure you're very you're familiar with it and your kind of comfortable with how I use that. It's important that the word yesterday appear in front of Mac's so that we're not including today's value in that calculation. Anyway so let's actually do that I think I've got a demo right now yep I'm gonna switch over to my browser and I've logged into my account here's my StockCharts account and I have the ability now to go to our advanced scan workbenches I'm on the members dashboard and the easiest way to get the advanced scan workbench is just...
over here on the left I'm gonna click on it. I could also click on new scan right down here the button here either way and this is our advanced scan workbench. Last year we we made some nice improvements to it so it's much easier to type scan instructions into this I know scan instructions can initially appear a little kind of intimidating but it's it's something that uh that is not too difficult and I'm gonna try again to help you with that today. So we already have two clauses in here type is stock and SMA the simple moving average of volume for the past 20 days is greater than 40k. Those are just nice little starter filters that help us. I'm gonna add one more starter filter here I'm going to type it on my own essentially create a new line here and then type and country equals US and that's just because of the kind of investing that I do if you obviously if you're in a different country you might do it differently. We have to add the word "and" again. All of these clauses are our filters for again reducing the number of

stocks

that we're looking at. Remember just read this if you're confused read the sentence up here and then make sure that it all makes sense in English. Starting however many trading days ago which is usually 0 starting now show me the symbols that meet the following criteria type is stock and the country is US and the volume is less than the average volume is is greater than 40k and now we're going...
to do and RSI and again with the parameter 14 is greater than 40 and implied in that is that's today's RSI value is greater than 40 and another final clause here yesterday's max for the past three days RSI whoops RSI 14, notice as I type it it makes suggestions that tries to help me is was less than 30 whoops we wanted to use 30 didn't we, 30 there we go, so today's RSI 14 is greater than 30 however for the past three days before that the RSI was less than 30. That's what the scan says. I know it's a little kind of technical but that's what it says.So the first thing I'm going to do is check syntax make sure it's everything's right, yes I've got a green result from that and now I can run my scan. So let's run it right now, see what results we get back. Here we go, I got back in this case nine results so out of the over a hundred thousand

stocks

in our in our scan engine database now nine of them match this particular criteria and is actually nice that's a nice number you're looking for scans that return anywhere from you know 2 or 3 up to maybe 20, 30

stocks

is it just has to do with how many charts you want to you know physically go through and look at but if if there's more or less then you might have to make some adjustments to this to your scan but that's actually a really good number. What I'm gonna do now I've done this in the past you can see more about this in some other

Deep

Dive

s, I'm...
gonna store these results in a ChartList so that I can look at them in more detail. They're now stored in a ChartList and they are part of my account and I can look at them in a bunch of views. This is summary view but the view that I'm most interested in when I initially run a scan is what I call CandleGlance view, the mini charts. The first thing I'm interested in doing is making absolutely sure that these charts meet the criteria that I specified so what I'm going to do initially is I'm going to add the RSI indicator to these charts and hit go and now I'm just gonna quickly eyeball to make sure all of these

stocks

have recently moved above 30 after being below 30 for a length of time and yeah they all look like they have so the reason I'm doing this is I want to make absolutely sure that what I thought was telling the scan engine to give me is actually what I got back and so the by by adding the RSI to the CandleGlance and then just visually looking at it real quick I can validate that yes the scan engine is

find

ing me the

stocks

that I want. Alright so now I can look at this in a couple of different ways. I'm now going to switch from CandleGlance view. I'm gonna switch to what we call 10 per page view and 10 per page view is where I get to see the full chart for each of these and in addition I can hover over the chart and a little trashcan appears and I can make my decisions as to whether or not I want to keep this particular stock or...
get rid of this particular stock and so I'm gonna I'm gonna actually show you how you can get these settings and why I have the settings that I have here. I'm just going to quickly look at this however and maybe this will let me narrow down if I'm willing to invest in a stock. So for instance here's a stock where it's been going down for quite some time the month of December I don't even know yeah so is this is Knoll Incorporated and that looks pretty dire frankly still I would say the turnaround is not something that unnecessarily willing to invest in myself personally yet I'm looking I'm gonna be looking for a little more evidence that things are moving higher before I'm willing to pull the trigger in that particular case. Maybe something like this where we've had a little bit of an exhaustion and then we're recovering and now we're starting to push above. That that has potential I'm again I might need to know a little more. So on and so forth. So the point is that I now have my microscope out and I only have to look at the the nine

stocks

that were returned in my scan. Spend some time studying them maybe add, bring some more indicators into the mix and make make final decisions as to whether I want to keep it or not. So that was, again, just a just a quick kind of overview of the process of scanning. It was showing you how

using

a very simple setup I can take that set up and turn it into a scan, run that scan and in...
this case I got back nine

stocks

that are worth my time to investigate further. I may, I still may not pull the trigger on any of them but it's much much better than having to look at a hundred thousand

stocks

every day so at this point I'm gonna ask Rachel do we have any questions that have come in Rach I've been going nonstop. Excuse me, yeah, Bernie's asking and I think this was sort of your first scan why did you use greater than as opposed to X? So I'm gonna talk about X in just a minute which is crosses above. Crosses above is a situation where two lines you want to compare two lines and I could have used X but in this particular case it was kind of already be happening because I was also having to test for it being below 30 the previous day's. If I wasn't doing the test of making sure is below 30 for the previous three days then and I just wanted to see had it crossed right then X would have been the right thing to use I'll show I'll show everybody X here in just a minute. Mm-hm, I'm so sorry I have a little cough, and there are no more questions but I just wanted to point out that I did put in the chat, a link to the slides so if you are looking for that it's right there. Great thank you very much I got another link coming up here in just a second I think you might want to put in there too. Okay, so now let's kind of broaden the topic here I've given you a very specific example as an illustration but let's...
let's make it more broad this might be the most important slide of today. It's a, it's a recipe approach for

find

ing useful technical setups customized for you and it it is it builds on a phenomena that we, I think we all experience maybe on a daily basis certainly on a weekly or monthly basis, which is you look at a chart and you go darnit why didn't I buy that stock back when it was really low now it's really high and I missed the move and drat, I really wanted to get in on that stock before that big huge move upwards and we've all seen that a long time ago one of the standard charts that I would talk about in this case would be Facebook but there were there are many many other ones that have become like two baggers or three baggers or whatever and you're going darnit, so we're gonna build on that. When you

find

a stock or when you see a chart of a stock where you kind of wish you had bought it and you but you failed to pull the trigger, you failed to

find

the stock before it moved significantly higher. That's okay. You can use that as a tool for helping you develop a set up around that stock and or helping you revise existing setups. So my recommendation there is when you

find

something like that a stock you wish you'd bought pull up its daily chart because daily is really a great way to do this and look for crossover signals some technical indicator crossing above or below some level or crossing some other technical indicator...
looking for look for crossover signals that happened just after the "perfect time" to buy and so it's important again to remember there's no technical signal it's going to tell you exactly when the bottom is. So don't go hunting for crossover signals or other kinds of things right at the bottom, any signal that happened at the exact bottom it's probably a coincidence. You're gonna be looking for signals that happen to two, three, four days afterwards or four periods afterwards and I'll show you an example of that in just a second. So it's it's right after that is what you want to be looking at. Once you think you found some signals that look interesting and I'll talk more about how you can

find

them in a second, then you're gonna take those signals and build a scan from them and then you're going to scan for

stocks

in the past. Say a 120-days out or 60-days out or 30-days out and you're going to see how, did I for the

stocks

that scan caught or would have caught say 60-days ago, how did they turn out? Did they actually move higher like you were hoping or did they did most of them turn around and continue down so on and so forth. So you can actually can that's how you can test and validate this the scan and the setup that you think you might have found associated with that great stock and see if it actually works for other

stocks

. That make sense? I hope that makes sense. You're gonna examine those results...
in CandleGlance view like I was showing you and basically study what happened right after the signal occurs. So I'm gonna give you will go through this in more detail here in just a second but there a couple other things I want to I want to put into your brain first. In order to do this obviously a big prerequisite for being able to do this effectively is to become more familiar with the technical indicators that are available and are out there. There are way too many that for you to study. Here are some good ones to start with and they're good not only because they're very popular, common, well explained,

relative

ly easy to understand, I also like them because most of them are extremely visual but they're also independent of each other. They don't base, they don't tell you the same thing and that's important too. If you're if you're building up signals but all of your indicators are basically being or just different ways to calculate the same information, then you're gonna get a lot of signals telling you to buy but essentially they're all telling you the same thing. So you need to make sure that your indicators are in kind of different categories so they're not all telling you the same thing. Here are some of the categories to consider

momentum

, trend, and volume and then I have another category at the bottom, which is basically something that gives you a really clear signal.

Momentum

is the the the concept or the idea that...

stocks

when a stock is moving in a particular direction it tends to continue moving in that same direction that's not always true-obviously- and something like news or some kind of big event can clearly have a big impact on a stock price and

momentum

will have nothing to say about that. So

momentum

is something that when a stock is generally just trending higher for no specific reason, just for just general reasons,

momentum

is very very good at identifying those situations and frankly those are the kinds of trends that technical investors can ride fairly effectively. The most common

momentum

indicator is probably the MACD. M.A.C.D indicator. There, it also has a cousin called the PPO and then DecisionPoint created another cousin called the PMO so that's what I meant when I said you can often you can often have several indicators telling you the same thing. I in this demonstration I'm staying with this with the grandfather of them all the MACD. When you're looking at trend a really great indicator is another one of Welles Wilder's indicators called the ADX system or the directional system. It has three lines we can actually see. Here's the MACD here I mentioned it I just want to show it to you it goes up and down it has a red line between it and the black MACD line the histogram bars here show the difference between the red line and the black line centered on zero and so you can use the histogram to see when the red line and the black line cross when...
the red line and black line cross then the histogram is going to move from above to below zero or or vice versa. So this is showing

momentum

, the one below it is the ADX and that shows trend and it shows obviously humans can spot trends just by looking at the chart but computer spotting trends is a little harder and the ADX can help the scan engine to really understand trends. When the black line is really high it means the stock is trending strongly and when the black line is low it means the stock is kind of directionless. When the stock is trending higher then you look at the red line or the green line. The red line if that's up that means that the stock is actually trending down and if the green lines up that means that the stock is trending up. So plus DI is down and I'm sorry plus DI is up and minus DI is down and the

strength

of the trend is what the black ADX line shows. You can get if you spend a little bit of time kind of comparing these lines to the actual price action you can get a good sense of how that works and we can use that in our scans to help ours, to tell the scan age and pick

stocks

that are just in a trend. Another one, a volume is is the Chaikin Money Flow. Here it is and it's another oscillator that goes above and below zero it looks at price and volume combined it's a really great indicator and so I use that often. Finally I look for signals for indicators that give clear signals and there are two that I'm showing in this chart....
The first are these dots, this is called the parabolic SAR yet another Welles Wilder indicator that is either above the price bars or below the price bars. It stands for SAR stands for Stop And Reverse and it's an attempt to calculate what a good stop price would be if you were invested in the stock. And the most important thing though is are the dots below the bars or the dots above the bars and when they switch from being below to being above that's a signal, that's a parabolic SAR signal, it's a very very clear signal. It's pretty visual and so again studying this and getting a sense of this would help you. So now what I want to now that I've introduced you very quickly to those indicators I want to show you how we tie that we can't could tie them all together into a setup. I'm gonna as part of that setup we want to make sure we have the chart so that we can see all of these indicators all at once. I'm gonna call this particular style my scan explorer style, in other words it contains all of the indicators that are part of my scan and it allows me to quickly see the scan results. And my recommendation is when you

find

a set of indicators that you like and you're testing as a setup go ahead and make those your default ChartStyle so that all of your charts will come up with those particular settings. Those settings I just showed you by the way and and here we go we'll put this in the chat window I've got available for you you...
can simply just type in this URL you have to make sure you get the letters the upper and lower case letters properly but if you type that in scharts.co /199m8f2 - then you will get a the chart I just showed you and you can then save that away as a style for yourself. So what are we looking for let's go back to the recipe I just mentioned. So I hopefully you already know this Apple has been a very strong stock for a very long time. This is the kind of stock that's really really interesting and it's been up even just going back a little ways it's been up 84 percent since June of last year and so Wow why haven't -hopefully you have- but but let's say we haven't invested in that so if not, what did we miss? What technical signals did we miss? What technical signals can we

find

around this? And so let's let's expand out taking a chart explorer style and apply it to Apple and then look back here around the time in June. June was the low and let's say that was the low we were most interested in in studying. Right around June 1st was the actual low, again

find

ing signals at that exact moment would probably just be luck but let's look at the days after that the days and weeks after June 1st and see if there are any signals that we might, could profit from and learn from and the fact of the matter is there are a ton. The parabolic SAR went from being above the price bars to below the price bars. As I show you there the MACD move from below...
zero to above zero, the MACD histogram move from a below zero to above zero which is another way of saying the red and the black lines crossed. On the the ADX line the the green line moved above the red line meaning that we shifted from being in a downtrend to being an uptrend that, notice that happened a little a couple of days after the low. And then the Chaikin Money Flow also turned over but this is interesting it turned over in the other direction it had been primarily positive and then it turned over to being primarily negative as soon after that that low. That's a little counter intuitive but hey it happened so let's explore that. Notice another thing about these arrows they're happening in a little later each one's a little later than the previous one this that means that it's they're kind of confirming each other and you're kind of spending a little bit of time you're being a little more cautious this one might have been a little too quick to make a firm decision on this one happened to later this is a little later this is a little later so they're confirming each other and then there's one final signal that I want to point out it's right here, where the two moving averages these are these are EMA's exponential moving averages they crossed right here now this is again several days if not several weeks after the low but this is a really nice set of confirming signals that are happening as that low occurred. So what can...
we use let's say we're interested in exploring those signals to say to see if those same signals have or give us good results for other

stocks

. Is this something that just was a quirk for Apple or is this something that we can actually build a set up from and then see

find

other

stocks

that are in similar situations. So taking all of that information and turning into a scan is done this way. We're going to start with three lines which are our global filters I you saw these lines before they were in the scan I did a minute ago these are just simply doing big narrowing down of situations that I'm interested in is my in my particular investing so I'm only interested in

stocks

, I'm only interested in US

stocks

, and I want to make sure they have at least a little bit of volume to them those are my criteria and they're global. So pretty much all my scans will have will start with those three things. The next section is really the interesting section, this is what's built from the the signals that I was showing you with the yellow arrows so we see the parabolic SAR has moved below the low the MACD histogram is above 0 plus DI is above minus DI and the Chaikin Money Flow is below 0 again that's a paradoxical some signal that's there. So these are these are conditions that have to and the yellow arrows. The final piece of the puzzle is what we call the trigger and the trigger is what happened today to kind of break the camel's back and make...
me very interested in in these particular

stocks

and in this case as you saw if we wanted to consider all those signals the final signal of the at that time was the cross the EMA cross over and so here's where I'm

using

the X like the question questioner was asking about I'm

using

the X here to say today the EMA 50 line crossed above the EMA 200 line so the the shorter faster moving average has moved up above the slower moving average that's a buy signal and that's going to be my trigger for this particular scan. So that is how I would take the visualness that we saw a minute ago associated with that low that Apple had, that we missed on, but but now that we're studying and turn it into a scan. So let's actually see what happens with that scan. I'm going to go back to the scan engine again the easy way to get there is to go to your dashboard and you could click here if you want but I've actually already saved this as the Apple breakout set up scan and so I'm going to click Edit scan and we can see this. Here's that same scan loaded up into the scan engine actually let me just make it just a little bigger - okay and I'm now going to run that scan right now and see what results. So I've already typed it all in this is exactly what we just went over a second ago. I'm going to hit run scan and in this case we get back one stock and that's interesting. It's it's not unusual that's the scan that I just created...
for you guys it has a lot of clauses it has six or seven clauses in it and the more clauses that a scan has then the more likely you're going to have a very small number of results because it's harder and harder for a stock to meet all the criteria. And in this case we did have one so we can look at that one and see if we're interested in it in this particular case wow this is kind of a breakout situation the stock was going sideways for quite a long time and then this looks to be news or some other kind of a big event that has caused a huge spike. Now those are exciting for for short-term traders but they're not very exciting for for longer-term traders because we can't predict news, technical analysis can't really predict news. Again I have to do some more research to see if this actually was news but what I'm looking for is something where it's a little more of a curve or it's been going down for a while and then kind of breaking a little higher. So this particular result is it super thrilling for me. I'm gonna go back though so but I can still experiment with my scan that's actually woops that's my old scan let me get my new scan back in here. Just because when I ran the scan today I got one result I still have a lot of work to do. I need to start playing with this box up here at the top this is the starting box the number of days ago and in fact starting today is kind of jumping the gun as I mentioned at the beginning of...
this I really want to put in something like 60-days ago, let's say as an example I haven't even tried this frankly I'm not sure I'm hoping I hope I'll get some results 60-days ago okay good we got five results that's a very nice number of results. Let me take those and put them into a ChartList and here we go and I'm going to then be able to look at it and I'm literally doing this for the first time so you and I are gonna gonna see the results together. I would say CPX doesn't look like a the kind of scenario that I'm interested in again I want something that's kind of a turnaround scenario here this is something else so I'm gonna delete that by clicking on the trashcan. Something that might be a little more interesting in this case would be so let's go with the the PBR-A. This one is a rising one who's been rising for a while PBR/A looks a little different so maybe that's the one we want. This looks like it's very low

relative

ly low volume with lots of gaps that's not the kind of stock I want to trade my I might keep that one - so now we've we've quickly reduced number two three from this original let's go back to ten per page now we can study these in much more detail

using

that style that I was showing you with all of our indicators on it. So again we're looking for a situation where a stock has been in a downtrend and is starting to move higher and in fact we're looking for that...
situation who have happened again 60-days ago so this is 60-days ago, I believe August of last year's, when the 60-day thing happened. The question is okay we had our signals occur here's the MACD crossover signal yeah I think right around here was when let's see or maybe it was even back here when the EMAs crossed over the question is what happened to the

stocks

since then, and in this case, the stock went sideways. In this case however here's a stock where the signal when it happened over here the stock moved higher and that's nice it would have been nice to be involved in this particular stock at that time so maybe that's an example kind of show it what we're doing here is essentially visually back testing this scan and what we can see here is that those signals came together and at a time that was very nice for this this stock. I would say the same thing happened in this in this case PBR/A has been moving higher since that happened for the past 60-days so on and so forth. So we can experiment with our scan in a like I said in a couple of ways. Another experiment we could do I mentioned moving it back and you could move it back 120-days you can move it back 30-days and just see how it would have done had you run the scan that long ago but another experiment we can do is we can remove some of these criteria. I'm going to go back to a zero day and look at look at the current stuff but I'm going to remove this final criteria because this...
was always suspect to me the CMF 20 being lower than zero that was always a little suspect to me. I'm gonna take that out and see if that makes any changes. When I run my scan now I get back eight results in fact some of these results look really good let's let's take some time put those in a ChartList here here's that ChartList go look at it in CandleGlance and yes we do see the beginnings of some

stocks

again we see our MTL stock and that's that still looks like news to me but we see some other

stocks

say this one that have had this kind of big drop and are now starting to move higher we can see that because of the moving average cross let go from CandleGlance back to 10 per page start to study these I'm looking for yes situations may be a situation like this where things are moving higher so on and so forth. Anyway so the but the point there being is that don't, the setup that I came up with initially is a starting point and we I can play with it I can tweak it I can play with the scan when it's run I can back test it visually, I can change the criteria some, add additional criteria if I have too many results, remove some criteria if I have too few, so on and so forth. So Rachel were there any other questions that came out of that demo? Yes there were. The latest one is from John, "when reviewing scan results how do I look at several time frames at once?" Okay great question. Thank you very much for that. There are a couple of...
different ways to do it remember scan results the best way to when you when you get scan results and you don't have a zillion of them the first thing I always do is put them into a ChartList your ChartList is, if you're an extra member you and you have scanning capability you have you have you have 250 of these ChartLists you should have a bunch available to you and scan results you'll probably have several of them that are dedicated to scan results. The first thing you'll do is validate that the the results you got are the results you expect by making sure that the crossovers are happening like you can specify them in your scan but then you're going to start to use either ten per page or even just the SharpCharts workbench itself here's the workbench and you're gonna decide do I want to keep this one or do want to get rid of it? Do I want to delete it and move on. After you've got narrowed it down to

stocks

that you're sure or

stocks

you're interested in then you can go to the workbench and change it from daily to weekly to monthly so on and so forth, or you can go back to your list and view your list in what we call GalleryView. There's there's several ways to do to do the answer to the question but this is maybe the most interesting way frankly in GalleryView which you can customize if you want, you get you take a ticker symbol and then this ticker symbol is displayed to you in several different time frames. We have an...
intraday view. We have a daily view here and we have weekly view. Finally and my favorites so it's a subject of a completely different

Deep

Dive

is we also include a Point and Figure view which I think is it should always be looked at gives you a very good filtered long-term perspective on a stock that's for another time but this this gallery view is a great way to see kind of the really short term the intermediate term and the long term view of any particular stock and as I mentioned you can also take these views and you can customize them that it also is a subject of a different

Deep

Dive

there is information in our help areas about how to customize GalleryView. Okay, and I had another question you one of your scans you did EMA crosses over EMA 200 or EMA 50 crosses over EMA 20, how do you do a cross under. So the X operator was what I used to do the cross over and if you think the X operator is actually just a quick little, it's kind of a hack, it's kind of a shortcut, underneath the covers when you use an X operator it breaks your expression into two expressions. The first is that the in this case the EMA 50 is greater than the EMA 200 today and the EMA 50 was less than the EMA 200 yesterday. So those two criteria is what makes up a cross over and when you use the X operator it kind of condenses those two lines down to a single line, makes life a lot easier, makes our scans a little more readable. Now but if you if you understand what's happening...
behind the scenes then it makes it very easy to pick that same operator and create a crosses below situation. You don't need a new operator, we don't have like a why operator or something like that instead all you do is you take the two expressions that you had for the crosses above and you just reverse their position. So in this case we had 50 at or EMA 50 x EMA 200. So that was the 50-day crossing above the 200-day. If we wanted the 50 to be crossing below the 200 what we really are saying is we want the 200 to be crossing above the 50, does that, I hope that makes sense. I think so. So you literally just simply reverse the position of the two indicators and put the one that was on the left on the right and vice versa and that has converted what was a crosses above to be a crosses below situation. I hope that makes sense. Okay and then we have another question from John, "Does the double backslash take out the line from the scan?" That's a great question and I apologize I meant to explain that, yes the double backslash turns everything on that line into a comment, meaning that the scan engine avoids it. In fact let me show that real quick, I'm gonna pull that back up we go back to my dashboard I go back to my scan and I edit it. Okay so here's my scan with nothing crossed out because I've left it all on but one of the really nice things about putting all of your scan elements one per line as I've done here is you can then use the double...
backslash to comment out that particular line to essentially turn off that clause and that's why I demonstrated that earlier hopefully you picked up on it. So so and you can then continue you could turn this one off and you could turn that one off for instance and run your scan in that particular way. Now if you have written a scan and you've put it all on a single line or on a bunch of different lines and it's it's it's not quite so easy to turn clauses on and off like I'm showing. You can always hit the reformat button down here, see this little reformat button, that will automatically turn your scan, take your scan no matter what it looked like before and turn it into this one clause per line, generally starting with the word "and" nice and neat and then then you have first off it's easier for you to kind of organize your thoughts to be honest with you and then it's second off you can do this little trick that I'm showing where you can do the slash slash to comment out a particular line. So I hope that helps. I think it does. Again there is another I know there's another

Deep

Dive

I did about a month ago about scanning and all the different capabilities that are there. I'm glossing over some of that and this one because I want to talk about the bigger concept of of generating set up making sure that setup works for you and then tweaking it. This is it's it's like riding a bike I guess, you have to you have to...
just do it a couple of times and then eventually you get it and then eventually it's all becomes natural and you should, the goal is to feel again much more comfortable just playing with these scans, tweaking these scans, turning these scans into something that's very very useful for you. Okay and then you want to spend a little time talking about scan.stockcharts.com? Okay, okay I can absolutely do that. So we, so writing scans we realize is not necessarily completely intuitive. We wish we could make it extremely intuitive you know dear Siri please write me this scan, working on that but you really do, it is worth taking time to understand scan syntax and really be able to tweak it effectively for what you really want to do because scans can get technical. Pun intended. We provide a lot of help online, we provide these kind of shows, we also provide a lot of written documentation but we also realize that that's not entirely enough and so we have fostered and created and we support a user to user help environment called scan.stockcharts.com and you can get there it's it's a website and it's a website just to be clear that is kind of independent of stock charts we we want it to have its independence so that users can feel comfortable asking and answering questions up there and there is a community of very very positive users up there that are very very good and while the name is actually the stock for stands for the StockCharts Answer Network and you...
can ask a question about any aspect of StockCharts it can be any part of the the website. Obviously a lot of people really focus in on scanning cause that's where a lot of the questions are and so if you want somebody to try and write a scan for you and you really don't have the time yourself you can go to scan.stockcharts.com you can ask the question there and maybe somebody like Mark D. who's a really nice guy a couple other people can help you out. Now we're we're getting down to the end of the wire so I did want to and that's in the aspect of help I wanted to mention some more things here that you can do if you need any information and with that it's already been an hour so hopefully this has been very helpful to you. Thank you very much for watching, I will see you next time on

Deep

Dive

into StockCharts music