Tuesday, 30 September 2014

0002 - About scans & lists

Let's start saying that a scan can be automated or manual.
A manual scan is the review of the stock in each list, elimination of the ones missed or negated, addition of new items.
Automated scans are done by programming.
They can be done both intraday or after close.

Let's start with REVERSAL setup. What I am looking for:

1) stocks declining 2 days with abnormal range, closing near lows;
2) stocks declining 1 day with a huge gap and huge volume and close very close to the lows;
3) stocks normally declining by at least 3 days above S200(D) (so I can review all kind of trend up declines and evaluate by my eye support/resistance zones)
4) stocks accelerating to the downside, declining by more than 3 weeks in a row and showing no pullback above Ema12(D) or that are into at least a second leg down
5) strong stocks showing a "waterfall". Strong = stock trending above its Ema8(D) and its S20(D)
6) panic declines. Panic = abnormal range/average range ratio developing in not more than 3 hours.

An important concept is "acceleration". If there's a change in slope to the downside, it raises the chance of a better pullback.

Stocks coming out from these scans will go into 2 lists:
A) reversal n.1 (1,2,3)
B) reversal n.2 (4)
C) reversal n.3 (5,6)

I'll refer to this scan as "REVERSAL SCAN" and I'll post stocks that I add and wipe out from my 2 lists.
So beware of this: you'll not see ALL stocks coming out, just the one I select.

Let's review the FLAG setup. What I'm looking for:

1) stock with strong/huge volume on the first push up. I'm ok with "strong" volume with stocks surging up from a prolonged consolidation zone during a long term uptrend. I prefer "huge" volume for penny stocks and all "pumped & dumped" stuff out there.
What identifies strong and huge? a simple ratio between volume and 20 days average that excludes last day. Above 2 and under 5 is strong. Above 5 is stronger and stronger. If I see a ratio of more than 50 I know I'm in front of a pumped and dumped stock or a dramatic change in the destiny of a company. Both worth a look!
All stocks coming out of this scan will be put into the  "VOLUME list" 

Scanning for stocks I happen to like something even if it's not a volume spike or a reversal candidate. These stocks, together with the ones making my "constant list", are put into a "DAY WATCH LIST".

What should be done with items in those lists?
They're all setups. I have to evaluate which tactic to use with them.
Behavior identifies the tactic to be used.
Then look for PPs to trigger the trade, set brakes (stops) and targets (if any).
If a trade is there's already a defined stop-zone...maybe a target zone...I have to do only this:
cause history taught me that what a stock does between entry and target is none of my business. It can go there in a bumpy mode or a slowly-candy mode. I can't predict it.

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