Scanning Made Simple

 | Apr 22, 2014 | 11:34 AM EDT  | Comments
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Stock quotes in this article:

xom

,

cvx

,

slb

,

oxy

,

eog

,

cop

,

pxd

,

hal

,

apc

,

psx

Not every trader likes to take the time to set up his or her own technical scans. Of course, some traders don't even like the technical picture at all. Still, there is a fairly easy way to simplify daily or weekly scans rather than poring through hundreds of charts or spending time with a lot of secondary indicators you may or may not understand searching for confirmations of breakouts or breakdowns.

A fast and easy way to find a watch list is to simply follow sector ETFs. There are ETFs for just about everything out there, from energy to financials to technology to agriculture to utilities to biotech to, well, you get the point. What I like to tell traders, looking to get into scans is to simply pick 8-10 ETFs that aren't too broad, but with top holdings that are liquid and offer both the opportunity to buy options and to short the stock.

So, rather than looking through a ton of charts, a trader can just focus on a few ETFs and more easily see a sector that is stronger relative to others or one breaking out or down in price. Once a sector has been identified, I would then head to the top10 holdings of the ETF and take a closer look at those charts. For instance, the Energy Select SPDR (XLE) has been very strong individually and relative to the market, so I took a closer look at the top 10 holdings.

ExxonMobil (XOM)

Chevron (CVX)

Schlumberger (SLB)

Occidental Petroleum (OXY)

EOG (EOG)

ConocoPhilips (COP)

Pioneer Resources (PXD)

Halliburton (HAL)

Anadarko Petroleum (APC)

Phillips 66 (PSX)

From there, I try to look for price opportunity. First, I want to see names trading over their 20-day moving average and preferably their 50-day as well. A recent cross of the 20-day MA over the 50-day MA is a plus. Furthermore, I want to see a chart where price is just breaking out over previous areas of resistance or just on the verge of breaking out. I am not very interested in charts that have run quite a bit, especially if price performance has exceeded that of the ETF parent.

Here I've included a graph showing both the 2-month and 6-month charts of all 10 top holdings and the ETF itself. I've outlined in blue the charts that have more interest or catch my attention, while the charts outlined in red are generally ones I will not have an interest in unless there is a pullback.

 

XLE Top 10
Source: StockCharts.com

 

A lot of the big oil names like XOM, VCX and COP have already broken out, as well as XLE. It is the names like PSX, OXY and EOG that interest me the most as they look about ready to break out, while HAL and SLB are early in their short-term breakouts. The caveat with HAL and SLB is their slightly longer-term charts look overextended, so my interest there would be lessened. While APC looks extended, that is a beautiful flag pattern on both the 2-month and 6-month chart and fits well with EOG and OXY. Overall, this also tells me oil is getting ahead of the natural gas plays, so there may be more opportunity in names with more natty gas exposure here if energy is going to stay hot.

While somewhat basic, simply watching sector ETFs then focusing on the top 10 holdings can be a fast and effective way to find trading opportunities each and every day.

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