TM Tools For Identifying The Top Intermediate-Term Setups
The goal of
intermediate-term trading analysis should be:
1. To get a good measure of the
market’s strength, and 2. To identify the best stocks to trade. TM offers several
intermediate-term analysis tools to help you identify the next winner. Using a combination
of a stock’s fundamental and technical aspects, top candidates are screened and analyzed
for ideal chart patterns to identify ideal entry points. This lesson will walk you through
the process of selecting top IT candidates using our proprietary lists and tools.
The Top-Down Approach
For thorough analysis, a top-down approach from
the overall market to individual stocks is recommended.
Market:
Having a feel for the strength of the market
should be the first step in your analysis. This is where our
Stats page will give you detailed information on market breadth for the day, including
volume and new 52-week lows and highs. Taking note of accumulation and distribution days
in the market, as well as measuring the bias in these moves, will help you identify
conviction a market move may or may not have had.
In addition,
Top RS and EPS New Highs List, found on our
the top stocks that meet his criteria for being in the top 15% of RS and ER ranking.
he begins to see it consistently produce numbers over 20, it is a bullish indication. In
addition to this, there is
Intermediate-Term Timing Signal, which is a system unto itself
for measuring the strength of the market with numerical indications that recommend
shifting funds to take advantage of bullish and bearish scenarios.
Groups:
After measuring the market, the analysis moves
to identifying strength and weakness in the different groups of stocks. This portion of
the routine is crucial for knowing where money is flowing into and out of. Knowing the
strongest sectors to allocate capital to is like taking the path of least resistance in
the markets. Ideally, we want to catch shifts early on in their stages, so keeping track
of the different groups on a daily basis increases our chances of this.
The following lists contain information on where the top
RS and ER stocks are located:
Industry Sector Concentration
Concentration
In addition to the
above information, the
Momentum list provides a quick read on the stocks that are moving right now, with a
proprietary formula that is feeding off of the top 0.2% of the market. This is the way to
identify what’s hot now.
Individual Stocks:
The most crucial aspect for success with the
intermediate-term trading method is the stock selection.
TM offers a plethora of resources on the
including the
Scanner, which is at the heart of the selection process. IT selections are based on a
combination of top fundamental and technical criteria. In our nightly
Trader’s Report, we use a strict set of criteria to screen for candidates that will
have the most potential to succeed.
The following lists also are screened for potential IT candidates: Helvetica>Mark
Boucher’s New Highs list,
Building a Base,
52 Week Highs. Keeping track of the stocks that meet top fundamental and
technical criteria is also an excellent way to measure the market’s strength as a whole.
- A 12 Month RS of 83 or better.
- An EPR rank 80 or better. We like to see earnings
improve at least 30% from the same quarter a year ago. - Last closing price of $12 or higher.
- Average trading volume of 100,000 shares.
In addition, we look for revenue to come in 20%
greater than same quarter of previous year, and return on equity to be at least 17%.
Using TM’s Stock Scanner
The following are recommended variables used to
screen for IT candidates on TM’s stock scanner.
1. Closing Price: >12. A closing price of $12
or more will filter out the smaller, and typically riskier, stocks in the database. There
is no need to fill in the box for a maximum closing price, unless you are looking for a
specific range. For example, if you were seeking only low-priced stocks, you would add a <= variable of maybe 20.
2. 50-day Average volume: > 1000. Volume
figures are expressed in hundreds, so you will want to leave the last two zeros off in the
number you are screening for. For example, 100,000 shares would be 100. As in the Closing
Price variable above, if you were specifically screening for small caps only, you might
want to put a maximum variable of 300 in the <= box.
3. EPR: 80. The Earnings Performance Ranking is
the company’s earning per share growth performance from the last reported period, compared
to the same quarter a year ago, ranked against TradingMarkets 5000 stock database. Ranks
are from 1 to 99, with the higher numbers representing stronger earnings growth.
4. RS (12 mo): > 83. The RS is measuring the
relative strength, so an RS of 83 will screen for the stocks that have outperformed 83% of
the database. Even if a stock has a bullish pattern, the chances of it working out are
less if the RS isn’t high as well. Earnings may be the driving force behind stocks, but RS
will tell you what’s driving now.
5. Closing Price > 50 Day MA, and Closing
Price > 200 Day MA. This filter will screen for stocks that are trading in the upper
portions of their ranges. When analyzing chart formations, it important that the stock be
within 15% of its 52 Week High for a breakout.
6. Sort by Sub Sector. In accordance with your
research into Groups, this filter will narrow the field to ensure your selection will be
within the strongest of groups. Leaving this filter blank will give you a range of all
stocks in the database that meet the criteria, and can be beneficial for gauging the whole
market.
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Though the criteria used for scanning ideal IT candidates is fairly straightforward, don’t
feel discouraged from tweaking the scanner to find setups out of the ordinary. There have
been many lessons written on this site for special circumstances using the scanner, and in
bad markets like the one we’ve been having, select swing trading can be a great means to
pull in some dollars. Other than that, there is no real need for IT traders to set
variables for the ADX, DMI, Price Chg, and 3 and 6 month RS’s. If you are unable to do the
scans for a period of time, you can always catch up by re-setting the default dates above
the scanner for the time period you were away.
Downloading The Data Into
Excel
Those more comfortable working with their data
in Microsoft Excel can do so by following these steps:
1. Open your Microsoft Excel program.
2. Select your scanning variables along with the
"Export to Excel" field.
3. Hit "Start Search," and the data
will automatically download into Excel format within your web browser.
Once in the Excel environment, you can
manipulate the data by selecting Data, then Filter, then
Auto Filter.
Once you have selected Auto Filter, you should
see pull-down tabs at the head of each column. These pull-down menus will allow you to
sort the data in whatever way works best for you. For example, if you imported a hundred
candidates and wanted to see them ranked by EPR, you would set the filter and let Excel do
the rest. This manipulation can be extremely beneficial when sorting through a large
number of candidates, as well as gaining further insight into the strength of the market.
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Summary
TM’s resources for intermediate-term traders are
convenient and vast. Using a top-down approach to your analysis will ensure a thorough
breakdown of the markets, making sure your final decision to set up in a stock is made
with confidence. Not only are TM’s tools beneficial, but commentary from
Truebenbach,
and
will give you insight from their experience, keeping you out of danger and on the road to
to profits.
Best of luck with your trading.
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