It's Fed day. On days like this, I tend to do a lot of sitting around on my hands until after we hear from the Fed. We're sitting above the $206 area in the SPY I noted as resistance yesterday. Heck, if you can push through it intraday, then gap through it overnight. That's always the challenge with the markets.
Don't let anyone fool you, trading is one of the toughest jobs out there. You need discipline. You need a lot of trial and error. You need to know you'll be wrong. And you have to accept it. Over time you'll have successes and failures. Don't dwell on either, but learn from both. Learning is a key, so in the spirit of learning and giving, since I'm not looking to trade into the Fed, I thought I might share a scan I've been working on.
Often you'll see charts posted by many of the technicians on the site and you may wonder how they found a particular chart or group of charts. So I thought I would post one of the stockcharts.com scans I've started backtesting and watching. Note that this one is earlier in development, so I am still accumulating data, but I find the thought process very valuable.
I'll start with the basic scan coding, then we'll look at the early morning results and finally, I'll outline the specifics.
[type = stock] AND [Daily SMA(5,Daily Volume) > 100000]
and [today's MACD Signal(3,8,13) >= yesterday's MACD Signal(3,8,13)]
and [Close > 4.99]
and [CCI(21) > 90]
and [today's CCI(21) > 2 days ago CCI(21)]
and [rsi(8) > 60]
and [today's rsi(8) > 2 days ago rsi(8)]
and [country is US]
and [today's close > today's sma(10,close)]
and [today's close < yesterday's close * 1.076]
and [MACD Hist(3,8,13) > 0.0]
and [yesterday's MACD Hist(3,8,13) < 0.0]
and [MACD Hist(10,50,10) > 0.1]
The scan produced 14 early morning names. Based on volume and movement during the day, the amount of charts resulting from the scan will often change by the closing bell. Still, this has a little something for everyone today.
I try to tick off everything from momentum to trend to volume to price resistance in most of my scans. I try not to use multiple indicators from the same "class." In other words, most momentum indicators will turn up similar results if given the same parameters.
This starts with limiting the scan to stocks with a five-day volume average of 100,000 shares or more with a close over $4.99, which provides assurance of at least moderate liquidity. The bigger the volume, the more liquid the name.
I do have multiple trend indicators in this scan. The moving average convergence divergence (MACD) signal is a short-term trend indicator and I just want to see that staying steady or rising from the previous day.
The commodity channel index (CCI) is a more moderate trend and I use a reading over 90 as an indication of either a strong trend developing or the potential for a short-term, very strong move higher in stock price. Also, I want to make sure that it is rising from prior days.
Momentum is measured with the relative strength index (RSI) code line and I want to see it bullish as well as rising similar to the CCI. I am using a shorter-term eight-period here because, again, I am looking for short-term swing trades.
I restricted this scan to stocks trading in U.S. markets.
I added a line to only produce stocks that have closed above their 10-day simple moving average (SMA). I want to buy strength rather than weakness.
In slight contrast to what I just said, I want to buy strength, but not too much strength, so this scan adds a code to eliminate any stocks opening 7.6% greater than the prior close. Basically, I don't want to chase too much of a gap. In all fairness, I am still working on this number, but I have been using the 7.6% limit for several weeks now and I have no issues with it.
Back to the MACD, I added a short-term bullish crossover for the histogram as a trigger.
Also, I added a long-term trend reading with the MACD where I want to see it positive and not a threat to trigger bearish the next day.
This is just one of 20 scans that I'll run through on a daily basis, but it has produced some interesting results and intriguing charts thus far, so if you have a little time over the holidays feel free to play with it and adjust it to your own liking.