Oversold in a newly established Bull Trend + Scanner you can use
You must have heard the phrase, ‘Trend is your friend’.
Identifying the market bias correctly is key in improving your trading results. Price patterns, support & resistance levels can help in limiting your risk. The real edge comes mainly from getting the trend right. Even if your entry is not ideal, as long as you are on the right side of market bias or trend — you should be okay.
Few pointers to keep in mind as you decide on market trend:-
- Keep it simple. What that means is that just by observing the price chart, if it the slope is positive (lower left to upper right), it is an uptrend. This applies to any time frame. If you are unable to decide if the market trend has changed, it is best to assume that it has not. And there is nothing wrong in waiting for better picture to appear.
- Do not trade against momentum. Just by glancing at any chart and in any time frame, you can see if the candles are ‘Trend Candles’. Meaning the price opens at the low of a candle and closes at high. Also observe how resistance levels are being broken (up or down) in various time frames. Swing high or Swing lows.
- Keep an eye on the first High or Low of the session. If for example the market gaps up and shows strong momentum by testing the highs and candles clear resistance levels on closing basis — that should be the market bias. Below is a 5 minute chart of $PANW from March 11th that I personally traded.
That said here is the scanner that you can use on www.StockCharts.com website, to come up with oversold positions in an established Bull trend. Simply copy-paste the following and tweak as per your comfort level.
[type = stock] AND [country = US]
AND [Daily SMA(20,Daily Volume) > 100000]
AND [3 days ago Daily High > 3 days ago Daily Upper Kelt Chan(20,2.0,10)]
AND [Daily CCI(10) < -100]
and [Stoch RSI(14) < 0.30]
and [optionable is true]
and [Close > 40]
What does this scanner do? It looks for stocks that are trading for more than $40 in U.S. market and have an average volume of more than 100K shares traded. RSI and CCI for those stocks should be currently below 30, and -100 respectively. Also it should be option-able.
Do the opposite if you want to look for overbought in a newly established Bear trend. If you try it out and have questions, please ping me on Twitter or you can always e-mail at email@example.com