Feb 24, 2010

Stock Scanner Setting to Catch the Trend-line Break

Written by Katie Gomez

The Trade-Ideas stock scanner can not only show you events that are happening now that have implications for short term day trading, it is also used to find trading patterns for longer term investing or swing trading.

One of the most powerful trading set ups is a trend-line break either up or down. What we will demonstrate now is how simple it is to create a monthly trend-line breakout system using alerts and filters that are inside the Trade-Ideas stock scanner.
Let’s start with the filters. We are looking for stocks that have been trending lower as of late. In order to find that stock pattern we will use our position in 20 day range filter. We will set the maximum value to 15%. That means that stock has to be trading in the lower 15% of its trading range over the last 20 days. To avoid stocks that don’t move we added a volatility filter set to have the stock trade at least a range of 1 dollar over the last 20 trading days. If you ever want to know how to set min and max values in our filters and what those values mean, click here to access a tool that we created which specifically explains everything in detail.
Now let’s set the trigger to get us to see when the negative trend is broken. The easiest way to do this is to select a 5 day high as the trigger and to make sure that the high is above the high of yesterday.
In the attached picture above you can see the last stock that came across SNMX, take a look at the daily chart for yourself. Finally to make sure this strategy is viable we ran the odds using our OddsMaker. We said we were going to be buying these stocks and holding them for 3 days. Sure enough the results are pretty impressive, with a win rate for this strategy at over 66%.
Being a successful trader means finding what is working more quickly than your competition. This whole exercise took less than 10 minutes to build and test the strategy. We are certain that no set of tools on the market today can get you better and more timely results. That is the power of using the Trade-Ideas stock scanner and our back testing tool called the OddsMaker.
Click ‘Buying the Trendline Breakout‘ for the exact set up.

March 2012 Update:
The Trendline Breakout link above now points to the right strategy.
I ran OddsMaker to test the following trade plan:  Look for trades from 30 minutes after open to 4 hours before the close (only morning session).  Hold for 4 days until open.  Stop loss of $0.35 + wiggle.

Note the nice ratio of average winner:average loser.