Chris

Our Stock Screens and How They Happen

Tradesight has been around for about a full decade now, and every day since we started, we run our scans and deliver 5-20 stock entry points with stops in both the long and short side of the market. The process of doing this is fairly refined now. What used to take two hours each day (and couldn't be started until two hours after the stock market closed when the data was fully available) now takes less than 30 minutes.
For those that don't understand the process, we have about 10 screens that we run on the daily charts of the entire database of US stocks based on different underlying technical parameters. These screens (5 long and 5 short) generate a list that can be anywhere from 30 to 300 stocks a night, and then we go through these manually, looking over the charts, and make decisions about which 5-20 qualify to be on the report for our subscribers.
The reason that I'm writing this today is to discuss the impact of wild market fluctuations, such as what we have seen recently, on these screens. In a stable market, ideally we like to find long and short ideas each night. Obviously, you can wake up any day, and the market moves up or down, so you want to have plays in both directions. As the market remains generally stable overall, we do tend to find picks both ways. We prefer to short weak stocks on the premise (and a correct one, I might add, statistically) that they might head lower and to go long strong stocks because they tend to continue higher. We then use market direction during the day to support our entries.
When markets fluctuate wildly, it has an impact on what our screens generate, and the reason is somewhat simple. When the S&P and NASDAQ take a 15% hit in a short period of time, almost everything gets hit. There are very few stocks that are left in the top end of their range that could be considered for breakout formations and upward movement. Two weeks ago, I literally ran all 5 of my long screens and got a total of 2 stock ideas...and both were stocks that were so thin that I would never list them even if their patterns were perfect, which these weren't. We have a lot of subscribers trading big money through Tradesight, and they don't appreciate being directed to stocks that trade so little volume that they can't get in and out for size at will, especially at our specific triggers.
Likewise, after the market bounced sharply off of the lows after the VIX spike over 40, we quickly ended up in a scenario where several of the screens on the short side weren't generating picks.
There is a reason that we also deliver trade calls during the trading session. When markets gap, it can ruin our calls from the report. We had a few days over the last month where we only had long ideas or only had short ideas because the market was too strong in that direction and plays in the other were non-existent. If I list 5 long ideas and the market gaps down 30 points on the S&P, those calls probably are useless. You have to "call it from the tape" as they say, which is something we do every day anyway. We keep subscribers focused on market direction and find intraday pattern setups.
In an environment such as this, with so much uncertainty in the world and the market wildly swinging, the one constant is that my screens are only turning up a limited number of calls...in EITHER direction. That means that until things stabilize and stocks can get back into better basing patterns to establish entry points, we will have less calls on the report and look for more intraday.
We're entering the 10-year anniversary of Tradesight, just over six months away. We will be sharing some of these insights here in the Blog along the way. Check back frequently or follow us on Twitter to stay updated. Also, please note that if there is a specific topic that interest you daily, you can come to this blog and click on a keyword in the word cloud on the right and just pull up the articles that relate to that topic. Topics that are covered frequently show up as bigger fonts in the cloud.

by Chris