Tuesday, October 12, 2010

Update Pocket Pivot Scan for Telechart

I've been slowly working on fine-tuning the "Pocket Pivot" scans for Telechart that I have shared a few weeks ago (please see here and here) and thought I would share for any traders (if there are any) interested in the changes.   I in no way expect this to be perfect, but it seems like there is some discretion with using this method anyway so I don't think there will ever be a "perfect" scan to find every setup.

I added a few criteria to reduce the number of stocks that were coming up in the scan on a nightly basis.   I did not want to reduce it too much however, so I had to play around with a number of combinations.   Here is the overall combined scan to use in Telechart - copy and paste the formula into a PCF and then create an easy scan using the newly created PCF and using "common stocks" as the main search list.

(C > C1 AND V > ABS(C1 < C2) * V1 AND V > ABS(C2 < C3) * V2 AND V > ABS(C3 < C4) * V3 AND V > ABS(C4 < C5) * V4 AND V > ABS(C5 < C6) * V5 AND V > ABS(C6 < C7) * V6 AND V > ABS(C7 < C8) * V7 AND V > ABS(C8 < C9) * V8 AND V > ABS(C9 < C10) * V9 AND V > ABS(C10 < C11) * V10) AND (C1 > (XAVGC10 * .98) AND C1 < (XAVGC10 * 1.02)) AND (AVGV10 >= 1000) AND (XAVGC9 > XAVGC20)  AND (H - C <= (H - L) * .50) AND (C>5) AND (C>XAVGC9) AND (C<MAXH10.1) AND (C<MAXC65.10)

Breaking the above scan down goes as follows...

Main volume criteria - (C > C1 AND V > ABS(C1 < C2) * V1 AND V > ABS(C2 < C3) * V2 AND V > ABS(C3 < C4) * V3 AND V > ABS(C4 < C5) * V4 AND V > ABS(C5 < C6) * V5 AND V > ABS(C6 < C7) * V6 AND V > ABS(C7 < C8) * V7 AND V > ABS(C8 < C8) * V8 AND V > ABS(C9 < C10) * V9 AND V > ABS(C10 < C11) * V10)

Near (within 2%) 9 Day Moving Average (yesterday) - C1 > (XAVGC10 * .98) AND C1 < (XAVGC10 * 1.02)

10 Day Volume Criteria (Above 100K shares) -  AVGV10 >= 1000

Short-Term Uptrend (9 day above 20 day) - XAVGC9 > XAVGC20

Close in Upper Half of Daily Range -  H - C <= (H - L) * .50

Price Criteria (Above $5 and above 9 day MA) -  (C>5) AND (C>XAVGC9)
In Short-term Consolidation (10 Days) - C<MAXH10.1

Not Extended or Already Broken Out - C<MAXC65.10

I'm sure there are other ways to set this up, but from what I can see, I think this will work out alright.  I am not getting a bunch of stocks that already broke out of large bases and are extended.   I am also avoiding for the most part stocks that are wedging higher.   If there was a better earnings criteria in Telechart, the scan would be super.  Here are some of the charts that have shown up in the updated scan (second panel shows indicator).

All Charts from Telechart, Courtesy of Worden Brothers, Inc.

One thing I will be paying attention to this earnings season is the predictability of positive earnings breakouts based on Pocket Pivots occuring a day or two before the earnings release (or in some cases the day of the release itself).   In their book, Morales and Kacher describe this phenomenon and believe it makes the typically stupid idea of buying before earnings not nearly as risky as usual.   As such, I will be loading a list of companies reporting earnings each week into a watchlist in my Telechart scans to see if any show Pocket Pivots and study how they perform.   We'll see how it works.

As always, good luck with this and please let me know if you have any questions.   I'll try to help if I can, although I am in no way an expert at this, rather just someone trying to put together a new strategy.   Take care.


Jeremy said...

hi Mac

Just a quick question, what is ABS in your scan? as always, thanks for sharing your ideas.

Pradeep Bonde said...

Try adding a criteria like (C - C1) >= .25

It will help eliminate some small moves.

Mac said...

Thanks Pradeep - I will look into that - it's a good idea. I may do a percentage move however strictly because of lower price stocks - 1/4 point on $10 stock is still a 2.5% move which would still be OK for a PP.

Mac said...

Jeremy - ABS stands for absolute value I believe.

tomham said...

Here's a Real Code for my version of Pocket Pivot, suitable for StockFinder 5. Note it is a Condition (true/false) and not a plotted value. Hope this helps.

'|*** StockFinder RealCode Condition - Version 5.0 www.worden.com
'|*** Copy and paste this header and code into StockFinder *********
'|*** Condition:expanded version of pocket pivot
Static Count As Integer
If CurrentIndex >= 55 Then
If Price.Low(6 ) < Price.AVGC(10, 6) OrElse _
Price.Low(6 ) < Price.AVGC(50, 6) Then
Count -= 1
End If
End If
If CurrentIndex >= 50 Then
If Price.Low(1) < Price.AVGC(10, 1) OrElse _
Price.Low(1) < Price.AVGC(50, 1) Then
Count += 1
End If
Else If isFirstBar Then
Count = 0
End If
If CurrentIndex >= 54 Then
If Count > 0 AndAlso _
Price.Last > Price.Last(1) AndAlso _
3 * Price.Last > 2 * Price.High + Price.Low Then
Dim Test As Boolean = True
For i As Integer = 1 To 10
If Price.Last(i) < Price.Last(i + 1) AndAlso _
Volume.Value <= Volume.Value(i) Then
Test = False
Exit For
End If
If Test = True Then
End If
End If
End If

Heath said...

I would also try to use this on IBD 200 or New America Stocks.

Also another nice thing to try would be on the Stocks from Daily Graphs.

Anonymous said...

Appreciate your work on the pocket pivot scan....it looks like it has everything one would need to start looking for good setups.