This is a guide on how to use the End-Of-Day (EOD) Scan Results that I post everyday. If I miss a day, it will be because I came home from a long day at work and likely crashed into bed to sleep. In that case, I will post the scans as early as I can the next morning.
For the majority of the examples, I will use the EOD Scan Results of January 8, 2019. See image below (click to enlarge).
Let's begin by starting from the top left corner.
1.) Parabolic Scanner by Spyfrat and Pethuel Pomaloy
I have been a long-time follower of Senyor Spyfrat and his RSI(30) system, but it wasn't really until I read the articles of Senyor Pethuel that I really "got it". I highly recommend you read his blog at Medium.com to fully understand and appreciate the system.
Part 1 can be found here:
Parabolic Burst Continuation
Part 2 can be found here:
Parabolic Theory-Based Stock Trading
Part 3 can be found here:
2ND UPDATE: Parabolic Theory-Based Stock Trading and Some Reflections
Now, you might notice that I put a note below the Parabolic Scanner Box to state whether the scans are based on Daily or not. This simply means I used the scanner on a Daily time frame. Remember, if you read Sir Pethuel's articles, his scans are based on a Weekly time frame. I post the Parabolic Scanner Weekly time frame on FRIDAYS or weekends if I'm not too tired from work sa Fridays.
Here's the difference. For Daily it will look like this:
For the Weekly scans, it will look like this:
Priority is simply RSI Weekly minus RSI Daily. This is useful if there are multiple results. If memory serves me correctly, Sir Pethuel stated that the one with the highest priority should be entered into first, followed by the next and so on and so forth.
Why do I post daily scans when I can just post weekly scans all the time? Because the resulting data would not be accurate. If I used the weekly algorithm to scan on a Monday, the algorithm will reach back into the past week since it needs to calculate for 5 trading days. More often times than not, this produces zero results. So I opted to adjust the algorithm to work with daily data to show stocks that went parabolic on a daily time frame, but keep in mind that those that went parabolic on a daily time frame are high-risk plays.
2.) EMA 13-48.5 Golden Cross with RSI(28)
We tend to think that by tinkering with the parameters of our indicators, we will be able to improve our trading edge in entering setups. The problem is that we rarely back-test these parameters. Well, someone actually did, and across multiple international markets and across multiple time frames (e.g. Daily vs Weekly vs Monthly).
For as long as I can remember, the "Golden Cross" setting was supposed to be SMA(50) crossing over SMA(200), but as ETFHQ's blog shows, this is far from the truth. Based on his back-testing, the best combination for the Golden Cross is EMA(13) and EMA(48.5) on a Daily time frame. If you're an Investagrams user, just replace EMA(48.5) with EMA(48). I don't think 0.5 makes a big difference.
Why EMA? Just explore his blog, and you will find why EMA is superior to SMA.
You can find the article here:
Golden Cross – Which is the best?
He also states that Fractal Adaptive Moving Average (FRAMA) is the best "moving average" indicator, but I'm still working on that. Will let you all know once it's up and running.
As for the RSI(28) setting, I read his back-tests on Technical Indicators - the fight for supremacy. He back-tests Stochastic, MACD, RSI, and others I don't know about, but these 3 have been completed and have results. Based on my reading, it was only RSI that had a "positive conclusion" wherein he states the following:
"Never before have I seen such a dichotomy of profitable and unprofitable trades when an indicator is above or below a level as is the case with the RSI being above or below 50. This proves that momentum is a strong and valuable predictor of market direction and the theory behind the RSI is sound."
Kudos to J. Welles Wilder Jr. for making the RSI. It's my favorite indicator (obvious ba? hihihi).
What's so weird is that Senyor Spyfrat had already been using the RSI(30) wwwaaaayyyyyyy before this test was performed! That's why Spyfrat is LEGENDARY!
Whether to use RSI(28) or RSI(30) is entirely up to you, but the scans will be sticking with RSI(28) to remain faithful with ETFHQ's back-test.
Here is my own
back test results from Jan. 1, 2010 to Jan. 1, 2020
3.) 55 Day Breakout with Momentum Rank
Have you heard of the Turtle Traders?
This is the story of how a group of ragtag students, many with no Wall Street experience, were trained to be millionaire traders. This story answers the question of whether great traders are born or made.
Try to get your hands on Michael Covel's book, The Complete Turtle Trader to understand the rules that the Turtle Traders followed. I know there's a PDF version out there.
The Turtles followed two systems; System 1 and System 2.
System 1 used a 20-day breakout for entries with
N as a measure of volatility (an equivalent of the present-day ATR, so just use ATR if you wanna use the
N as a stop loss). I felt that System 1 was too complicated and had more probabilities of giving false signals, so I didn't like it too much since there were other signals that you had to look out for.
Example: If previous 20-day breakout was a winning trade, you do not enter this current 20-day breakout. If previous 20-day breakout was a losing trade, then you enter this current 20-day breakout.
Sorry, but having a full time job doesn't give me the luxury of keeping track of previous 20-day highs.
System 2 used the 55-day breakout for entries and had much simpler rules. If a stock broke through its 55-day high, you entered no matter what. System 2 was a fallback should System 1 provide a false signal.
Nice and simple.
Me likes.
Yes, please.
I use Donchian channels to monitor 55-day breakouts in my charts (Investagram has it) as well as to plot support and resistance levels (use weekly time frame). Try it out.
Recently, I've added a momentum rank feature to it. This is because if we get multiple results, how do we know which one is the "best"? Thus, the momentum ranking system will guide us with which stock we should be prioritizing, ergo, which stock we "should" be entering into first.
4.) 52-Week High/ Low
If you're a trend follower, you should already know why you ought to be buying 52-Week Highs. 52-Week Highs have the value of 1 (signifying "True", zero means "False") under the 52-Week High column, and is colored blue. I'm too lazy to change the code to True or False right now...maybe I'll do it over the weekend...get it? Over the wee....never mind.
For bottom pickers, the 52-Week Low is for you, but make sure that this is paired with a bullish divergence. For newbies, just google Divergences and you'll be good. Under the 52-Week Low column, the value is 1 and is colored red.
If you want articles, here's one by Senyor Pethuel:
Trading the 52-Week High Breakout
I have another one, by North Star, but we'll get to that shortly. It's covered in the RSI(14) Weekly over Lvl 70 section a bit further down.
5.) Guppy MMA Crossover
Developed by Daryl Guppy, an Australian trader, the Guppy Multiple Moving Average(MMA) is a nice and simple trend following system.
You can read about it here:
Guppy Multiple Moving Average - GMMA
He also mentions in his book that to create a scan out of the MMAs, you simply get the sum of the moving averages for the Short-Term(ST) Traders, and for the Long-Term(LT) Investors. If the sum of these 2 averages make a golden cross(ST over LT), then that's your "entry signal".
CAVEAT: read up on how Guppy uses trend lines as well as how to use the Guppy Count Back Line(CBL). In my experience, the MMA by itself is incomplete and is prone to whipsaw when the market is not in a trend.
You can read about the CBL here:
COUNT BACK LINE™
Great tool as a stop loss and for determining entry levels.
6.) Volume Spike
A simple scanner for irregular volume. Ave. Vol is simply the average volume for the past 250 days. 52 Week High volume is the highest volume reached in the past 52 weeks.
This is good for stage analysis of stocks. For example, if a stock has above average volume but price hardly fluctuates, this means that someone or some people are accumulating large number of shares without trying to make the price explode.
7. Momentum Rank: Top 10
I am a momentum trader. To be more specific, I am a systems trader with a momentum model. I developed an algorithm to measure the momentum of a stock and assign it in ranks. This is based off of the research by Jegadeesh and Titman. The article was published back in 1993 in the Journal of Finance and discusses why you should buy winners and sell losers, though I read it only in 2017.
You can read the research paper of Jegadeesh and Titman here:
Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
Since you don't know about my system (just yet! 😉), how I suggest you go about it is, you start from the top, in the case of the image above, you start with GREEN. You check GREEN's stock chart, check support and resistances, check RSI / MACD / DMI / Stochastic / bearish divergence / hidden bullish divergence / etc.
If you like the chart, then buy. If not, move down to the next in line. This gives you a nice and simple list which shows stocks that are
already in an uptrend.
If you want to know how to implement my system, I have a 2-part article for it.
You can find part 1 here:
How to implement a Systematic Portfolio Trading Strategy thru Momentum
It's a but outdated, but you can find part 2 here:
Implementing the Momentum-Based Systematic Portfolio
8.) Sector Analysis
The Rate of Change (ROC) concept is the same one that I understood from Jegadeesh and Titman's research. I used a 60-day ROC to see which sectors of the PSE were profitable.
Blue means positive ROC, and red means negative ROC. The higher the ROC, the better. In the picture example above, you should be checking out stocks in the Financial Sector, followed by the property sector, then holdings, and so on and so forth.
This is meant to supplement the other scans. Actually, each one is supposed to supplement the other. So yeah...ok, moving on.
9.) Bullish Divergence Scan & 10.) Bearish Divergence Scan
I remember reading an excellent post about Divergence by Trading Naked. Sadly, his website is down and the only copy I could find is in Scribd, which asks for a USD 8.99 membership fee. It has a 1-month free trial so you can get it that way, I guess. Sorry. I don't like risking my credit card online when I don't have to.
Anyway, the key takeaway was that divergences should be treated as an
indicator and NOT an entry signal. Just because you see a Bullish Divergence doesn't mean you enter right away. You wait for other entry signals such as breaking through resistances or making a new 55-day high or RSI(28) crossing above level 50.
Another good divergence article is by babypips.com. You can find the divergence section here:
Trading divergences
11.) RSI(14) Weekly over Lvl 70
This is a scan I made after reading North Star's blog (yes, the North Star we mentioned earlier in the 52 Week High/ Low section). You need to read it because he tries to dissect the way the ZeeFreaks tribe enters a trade.
You can find the blog post here:
Trend Following - Reverse Engineering ZF System
12.) RSI(14) Weekly below Lvl 30
The opposite of RSI(14) Weekly over lvl 70. Use at your own risk. This is useful if your a bottom picker.
Best to use as a watchlist to look out for bullish divergences.
13.) RSI(28) Crossover Lvl 50 with Momentum Score
As discussed in the EMA 13-48.5 Golden Cross with RSI(28) section, this is purely the RSI(28) that crossed over level 50 where previous candle was below level 50. Remember the ETFHQ article? Here's the link again to save you the trouble of scrolling up:
Relative Strength Index (RSI) – Test Results
I paired it up with the Momentum Rank so we can have a prioritizing method. Remember,
just because the score is negative, it doesn't mean that you automatically ignore it. The score is simply there to help us rank the stocks from best to worst.
14.) Mod TTS2 *New addition*
Abangan. Coming soon to theaters near you.
And that's it! Use each scan type in relation to the others. For example, if a stock made a 55 Day breakout, check if it made a 52 Week High, and if there was a volume spike. Is it part of the Bearish Divergence list? Is RSI(14) Weekly above lvl 70? So on and so forth.
So there you have it. Remember... you need to make a system that fits your style, risk profile, and personality. The scans are simply there to help. In the end, it is just you and whichever system that you can be
consistently profitable with.
FYI, I hardly check the comments of this blog so let me know if you have anymore questions by sending me an email: weekendtrader1@gmail.com
or feel free to add me in facebook.
God bless and more profits to you!
-Weekend Trader
