Screening software to identify stocks breaking out of consolidation.
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In this video we look at the breakout screener, and how we can use it to find stocks aligned to my approach.
Members will know by now that I look for a consolidation in price, followed by a breakout, with all technical analysis viewed on the weekly charts. Weekly charts are my preference for many reasons, but none more so than their alignment with fundamentals, which we also include in the scanning software.
That being said, let’s get straight into the scanner.
At the top of the screen we have the filtering criteria, starting with the date on Monday of any given week.
Next we have the exchanges, covering many of the major markets, including Australia, India, UK, Canada, US, and Germany.
If none of the exchanges are individually selected, the screener will assume that all the exchanges should be scanned.
We can also filter by Sector or Industry. This can be particularly useful if you want to diversify a portfolio into other areas.
Next we have some key settings to help us find our preferred breakout. The settings you see here are my personal settings which I use to filter stocks on a weekly basis, you can of course change any of them to suit your own style.
Let’s start with the consolidation range.
The scanner is defaulted to measure a minimum of 6 weekly candles, often more, but we will touch on that shortly.
We can choose to measure the range of consolidation by either using the open and close, or the high and low of the weekly candles.
If we choose the open and close, we would only be measuring the body of the candles, in which case the consolidation box could be drawn like this.
If we choose the high and low, the consolidation box would look more like this.
By using the high and low box as an example, the scanner can calculate its consolidation range.
We state that we only want to see consolidation with a maximum range of 15%. Therefore if the low to the high of consolidation was perhaps 17%, the stock would not be presented. Whereas if consolidation was perhaps 14% it would pass this portion of criteria.
Next, we have the minimum and maximum breakout percentages. This filter determines how far the breakout candle must be above the top of consolidation, and here we are looking for a minimum of 1% to a maximum of 20%.
The scanner would therefore look for one percent through to twenty percent.
This breakout bar is perhaps 10% and would pass the criteria. On the other hand, if the breakout bar only increased by half of a percentage point above the box, it would not be presented as a qualifying stock.
Next up, we have minimum and maximum breakout size. This filter is looking for the size of the breakout candle, from the open price to the closing price. In most cases I’m looking for a minimum 5% breakout size, thereby providing conviction during the week of its breakout.
Next, we have minimum volume, again a sign of conviction, and I like to see volume a minimum of 30% more than the previous week.