A breakout scan

Instead of naming specific stocks, lets look at the scan I use in TC2007 to get my list of stocks.

The basic idea behind breakout is to find stock experiencing range and volume expansion. There are many ways to scan for this and I am sure there will be lot of disagreement about how to do it. But anyway here are two simple scans for finding long and short ideas. This will also answer all those sending mail asking for specific stocks. All these scans are for those using TC2007.But the logic should apply in any programme.

Long Scan:
V >= (2 * AVGV30.1) AND C >= (C1 + .25) AND AVGC20 * AVGV20 >= 2500

Short Scan:
V >= 2 * AVGV30.1 AND C <= (C1 - .25) AND AVGC20 * AVGV20 >= 2500

Now if you run these scans today you will get 99 stocks in long scan and 87 in short scan.

You can use relative strength filter to look at reducing the universe. If you are a chart pattern kind traders you can eliminate using patterns.

Buying high volume breakout works under certain market circumstances. There is a large school of thought which says buying breakout does not work. My testing and experience shows it works on certain stocks selected based on fundamental or momentum criteria.

I personally sometime buy breakout, sometime pullbacks, sometime put buy stops in anticipation of breakouts.Lot of my success is due to stock selection methodology. If you select stocks with high probability of making a significant move, the entry method or criteria plays small role.I am not a big believer in chart patterns.

Note: Tomorrow we will look at how to reduce the trading universe.

No comments: