Scan the Market For Hot Stocks
Stockscores Foundation for the week ending September 23, 2019
In this week's issue:
In This Week’s Issue:
- Stockscores Market Minutes Video – Shorting the Elevator
- Stockscores Trader Training – Scanning for Hot Stocks
- Stockscores Feature Strategy – Shorting the Elevator
Stockscores Market Minutes – Shorting the Elevator
The stock market takes the stairs up and the elevator down. This week, I describe what is meant by that and how to profit from it. Then, my look at the markets and whether there is another wave of market correction coming. I will do a Stockscores Market Scan and look at the trade of the week on ROKU.
Click here to watch this week’s Market Minutes
To get instant updates when I upload a new video, subscribe to the Stockscores YouTube Channel
Commentary of the Week – Scanning for Hot Stocks
Stocks that are in play, those that have the story to capture buyer interest and enjoy market beating trends, leave clues. The outperformance of these stocks is driven by new information that gets the buyers excited and willing to pay higher prices, pushing these stocks in to market beating upward trends. Whether you like to trade large cap, well established companies or penny stocks, the signals from the market are the same.
The process to find them is very simple if you have the right tools. The Stockscores Market scan and an hour of your time at the start of the trading day will allow you to search all North American markets for the markers that telegraph a stock's future outperformance. Before I explain what to look for, let me provide some insight into the theory behind the trading concept.
Stocks that go on the steep upward trends that we all love to own do so because there is significant fundamental change in the company. To be more accurate, I should say that there is a perception of significant fundamental change. What is actually happening is not as important as what investors perceive to be happening. Sometimes stocks move simply because investors renew their interest in a good company.
These stocks move because of new information. A pharmaceutical company may have a new drug that is showing positive effects in testing. A mining company may be on the verge of a major discovery or a retailer may be enjoying great earnings because consumers love their products. Ultimately, it is about an improved potential to make money in the future.
The question you must ask is, "Do all investors get the new information at the same time?"
The answer, of course, is no. Every stock has investors who follow the company very closely and know more about what the company is doing than anyone else. These investors have an advantage over other investors because they can uncover new information earlier.
When they do find out something significant, they act. If the new information is positive, they buy the stock aggressively, causing the stock to move up in price and trade more volume than normal. Those are the signs that we want to look for.
Most of this abnormal market activity starts during the first hour of the trading so the trader who can dedicate that time to trading can uncover around 80% of the good entry signals that come through the trading day. If you have all day then you can find the other 20% of the opportunities as well.
The Stockscores Market Scan tool allows you to scan all of the North American markets for stocks that meet a variety of criteria. There are many ways to set up the tool to look for stocks that are "in play" but here are some simple settings to apply in the first hour:
Exchange - I like to scan the Canadian exchanges separately from the US exchanges because the Canadian market is less liquid, requiring a lower liquidity threshold which I will explain in a moment. So, set this filter to either All Canadian or All American.
Gain/Loss - set this to > 3% over the past 1 days. This will find the stocks that are moving up.
15 day Resistance - set this to breakout, doing this will help you avoid the stocks that are stuck in trading ranges and unlikely to make a lasting upward trend.
Volume Relative to 20 Day Average - set this to Above.
Number of Trades - this is the liquidity requirement, to trade we need stocks that are active enough to get in and out easily. Set this to > 200 for the Canadian exchange or > 1000 for the US.
You can start to run this scan about half an hour after the market opens. When inspecting the charts, look at both the daily and the intraday 15 minute chart. You want to focus on stocks that are starting moves out of low price volatility and with market activity that really stands out relative to how the stock normally trades.
For more information on how to get access to the Market Scan with Stockscores Membership, click here.
Back To Top
Each morning, I like to run the Morning Movers Market Scan starting about half an hour after the open. The aim of this scan is to find stocks that are moving up with more strength than normal. The idea is that stocks that are attracting buyers early may continue higher over the coming days.
It is important that you focus on stocks that are surprising the market with strength by breaking out of patterns of low-price volatility.
Here are a couple of stocks that I think have potential this morning:
HL is trying to break up from a cup and handle pattern on the daily. The weekly chart shows a good turn around pattern as the downward trend is being broken from a rising bottom. Higher volume lately shows the stock is being accumulated.
Back To Top
MLNT is seeing stronger volume today as it moves up from a rising bottom pattern of low price volatility.
Back To Top