Scanning for Stocks on Extended Runs

Published: 10/25/2013
By Corey Rosenbloom, Founder and President, Afraid to Trade
Afraid to Trade
Running these scans can become starting points for you to do other research to see whether trading
opportunities exist based on your strategies, writes technician Corey Rosenbloom of AfraidToTrade.com.
Which stocks have closed the most days to the upside for the prior few weeks and also days? How might we
trade these stocks?
Lets take a look at the most consecutive closes to the upside, starting with the weekly chart scan:

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Using TradeStation data and screener, we find the following stocks have closed eight, nine, or 10 weeks in a
row to the upside.
Were scanning for persistence of uptrend or extended runs for relative strength.
Garmin (GRMN) is a selected stock which we can see has closed nine weeks in a row to the upside:

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Theres two ways we use this type of stock screen, which is similar to how we use the screening for stocks
most extended from their 200-day SMA. Trend following or pro-trend traders can identify the stocks as the
strongest and getting stronger category for potential pullback (retracement or bull flag) entry trades with
the expectation of a future higher price high (trend continuation). Fade or reversal-style traders instead can
await for an immediate sell-signal (such as a break in a rising trendline or intraday reversal pattern) to
establish a short-sale/fade (or reversal) aggressive trade. Depending on your risk-tolerance and preferred
trading style, youre either betting on an extended stock to get more extended or an extended stock to
retrace/reverse lower to end the extended run. Heres the same type of scan using daily chart data:

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Popular stock Apple (AAPL) joined the Eight Club of stocks that have traded eight days in a row to the
upside:

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As is often the case, we tend to see extended runs after a breakout or consolidation formation as a stock
enters a positive feedback loop where buyers enter new positions and short-sellers buy-back to cover old
(pre-established) positions via stop-losses.
Best Buy (BBY) is another strong and getting stronger stock that I initially mentioned on a stocks most
extended from their 200d SMA screen from July 2013it continues to be strong and getting stronger.
Technology giant Microsoft (MSFT) also tops todays list of extended runs along with financial companies
Charles Schwab (SCHW) and Legg-Mason (LM).
Use these names and the consecutive close scans as a simple way to find stocks that may not otherwise
show up on more advanced stock screens.

Spotting Rounded Reversals in Real Time

shed: 10/7/2013
By Corey Rosenbloom, Founder and President, Afraid to Trade
Rounded reversals occur as a result of a gentle, as opposed to violent, transfer of supply to demand and
technician Corey Rosenbloom of AfraidToTrade.com shows how you can recognize the pattern.
How do you recognize an intraday rounded reversal developing in real time?
Lets take a look at the near-textbook example from October 1 and learn three factors that tend to precede
or triggeran intraday rounded reversal or failed trend day pattern.
Heres the 5-minute @ES futures chart with the three main factors highlighted:

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First, a trend day often begins with pre-market news/activity and an opening gap. A true trend day begins
with a gap and price continues moving in the direction of the gap for the rest of the session.
Just because price starts the day with an opening gap and continues moving in the direction of the gap does
not mean it will spend all day doing so.
When price starts the session as a trend day but fails mid-session, we call these failed trend days or
rounded reversal sessions.
There are three main factors that tend to precede and trigger a rounded reversal in motion:
1. Multi-Swing Negative Divergences
Using the 3/10 momentum oscillator (or similar indicator such as rate of change) or market internals such as
NYSE TICK or breadth, we can compare intraday price highs with corresponding oscillator highs.
If price continues to push to new intraday highs but our oscillator or market internals registers lower highs, it
serves as a non-confirmation as a divergence builds.
While its common to see divergences on any trend day, be on guard for MULTI-swing divergences.
2. Kick-Off Signals
Similarly, if we see price swinging down off an intraday high, its likely just another typical retracement.
However, if we see our oscillator and/or market internals make new lows for the session, this calls the
simple retracement into question and suggests it may be the first swing down in a new downtrend at a key
reversal.
This is similar logic to Richard Wyckoffs sign of strength or sign of weakness.
I use red and green dots in TradeStation to highlight new intraday highs or lows for easy comparison.
3. Price Breakdown
Indicators are helpful, but we make trading decisions and final confirmation with price itself.
The final signal or the third step in a rounded reversal is both a factor to watch and a trading trigger/entry
signal (in this case, short).
When price breaks under the 50 EMA or corresponding intraday trendline on a 5-minute chart, it typically
signals the official end of the trend day in motion.
Its also a low-risk, tight-stop trigger-entry point to play for the potential downward swing yet to come if
indeed the session unfolds as a rounded reversal.
Heres the same three-step process on a 1-minute @ES chart:

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Keep in mind also that the real-world trading environmentslike this onecan differ from the textbook
definitions with spikes or last gasp rallies such as that, which happened at 11:30 am CST on October 1, or
in fact, the surprise spike higher into the close.
Ultimately price did reverse lower to continue the rounded reversalthe final target is often a retest of
movement down toward the prior swing low (1,677 in this case).
This is just one example of the intraday version of the rounded reversal concept, but we can see it play out on
higher frames and in various markets as well.
By Corey Rosenbloom, CMT, Trader and Blogger, AfraidToTrade.com

canning for the Most Extended Stocks

Specialty: STOCKS
Published: 9/19/2013
By Corey Rosenbloom, Founder and President, Afraid to Trade
Afraid to Trade
Tickers mentioned: BBY, MU, NFLX, GME, GT
Running these scans can become starting points for you to do other research to see whether trading
opportunities exist based on your strategies, writes technician Corey Rosenbloom of AfraidToTrade.com.
Its time to update our Most Over and Under-Extended Stock scans for the month of September!
Lets start our search with the top six stocks most over-extended (on a percentage basis) up away from their
rising 200-day simple moving averages:

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Its often interesting how a strong stock (or weak stock) can remain in the top extended list month after
month, and thats part of the purposes of the scan.
We want to locate strongly trending stocks with incoming money flow and use them either as trading vehicles
(buying retracements or flag patterns) or investing candidates (holding for as long as possible until the trend
structure reverses).
This type of simple scan helps us achieve these goals.
For example, take a look at a few prior updates on GameStop (GME), a stock that has consistently appeared
in top trending stock lists (along with Best Buy lately):
Back to the current candidates, Best Buy (BBY) tops the list with a 67% reading above its rising 200-day SMA.
Other strong uptrending stocks, as seen in the chart below, include Micron Technologies (MU), popular stock
Netflix (NFLX), Goodyear Tires (GT), and E*Trade Financial (ETFC):
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Of these six names, Best Buy (BBY), GameStop (GME), and Netflix (NFLX) ranked in the Top Stocks Most
Extended to end July 2013 prior post.
The goal of this type of scan is to find powerful pro-trending names to trade (conservative strategy), or
candidates to look for aggressive reversals or fade trades (not my preferred use of this list).
The same logic can be applied to the weak and getting weaker stocks most under-extended from their
falling 200-day SMA:

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Similarly, Intuitive Surgical (ISRG) and Newmont Mining (NEM) carried over from Julys extended stock
screen.
Two stocks that have been in the news with multiple bearish headlinesAbercrombie and Fitch (ANF) and JC
Penney (JCP)also appear on the most under-extended (weak and getting weaker) list.

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These scans are starting points or launch-pads for you to do other research to see whether trading
opportunities exist based on your strategies.
The over and under-extended scans can bring candidates to your attention that may otherwise not show
up on other stock screens.