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In several years of looking at stock charts, I have noticed a reasonably consistent tendency of stocks to begin a climb from a fairly low level soon after three MA's are coincident, or nearly so. I use MA 5, MA 10 and MA 15, although it may work with other MA's too. Usually, this occurs after a decline but not at the absolute bottom of a steep decline, because MA5 has to RISE enough to meet the other two MA's.
Naturally, this doesn't always work (nothing ever does), but the chances of minimizing losses are improved by selecting stocks that have one day with big volume and increase in price within a day or so of the meeting of the MA's.

Comments are welcomed.

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permanentjaun
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Would you mind giving us examples you base this on?

Of course the true test is to find the stocks that follow your system and do not profit. What's the difference with those? Matt

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permanentjaun -

Go to a charting site where you can enter three MA's to be displayed on a stock's chart (I use AskResearch). Display,say, a three-month chart of almost any volatile, or high-beta stock such as ATML, CNXT, SYNC, VTSS, etc..and look for instances where the three MA's are squeezed together.Now, they can appear squeezed together under two circumstances : When the stock is still falling, and when the stock is recuperating.Naturally, we're looking at the cases where the stock is recuperating, or at least going sideways. Stochastic (5,3,3)can be used for confirmation.
Usually, the start of an uptrend will be kicked off by one day of price increase with big volume.
If the chart is displaying candlesticks,the three MA lines will hit the white candlestick about in mid-section.
I like to wait until I see the white candlestick because at times the MA5 will fool you by barely touching MA10 and then retreat.

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Just to see how they'll do in the next week or so,these are some stocks where MA5, MA 10 and MA15 are coincident or close. Some had good gains today, so there might be some pullbacks tomorrow.

LOUD...0.552

IINT...3.30

JMAR...1.16

CBMX...1.90

MPET...1.73

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Although I have given this system occasional thought in the past, I've made no great effort to refine it to make it more profitable.
Lately I have been looking at the possibilities a little closer. Some criteria that seem to improve the results are :

1.Price going sideways for 1 to 2 weeks.

2.The spread between the 3 MA's very narrow.

3.Small size of candlesticks.

4.OBV (on balance volume) on smooth slight rise.

5.Sudden (one day) higher-than normal volume and bigger-than-normal white candle.

If anybody is interested enough to look at charts with this criteria in mind, I'd welcome their comments/suggestions.

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mcw_yuma
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Hi Who,

Am really interested in finding a program or web-based provider of a real-time stock screen/scanner. I checked out the AskResearch website and read what I could about their various products (customizable criteria, portfilios etc) but no mention of screening.

FWIW, I am interested in how you found those stocks you mentioned earlier on this thread that have the three MA's close to each other...did you screen for them, or do a lot of research manually (entering tickers one at a time and checking each one's charts until you came up with that list??).

I actually have my own strategy that is similar to your concept, except using 4- and 8-day MA's, and looking for the separation of the two lines. These are just lineal representations of mathematical calculations, so SURELY there's some software SOMEWHERE that can scan real-time data and have pop-up alerts .....

Any help is appreciated. Cheers,
Mike

--------------------
The measure of a man is not where he goes on Sundays, but who he is Monday through Saturday.

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Hi mcw-

I'm not a day trader,just a rather a small investor by most standards, so I don't use real-time scans or filters. There are several ways to do end-of-day scans.
Stockfetcher.com ($8.95/month)allows you to write your own filters and read other people's filters and do some backtesting.The problem I found is that access to too many filters tends to be a hindrance rather than a help. There is no one scan or filter that's superior to all others, so it's better to stick to one you are comfortable with, and get good at using it.
There are several free end-of-day scans.One is StockTA.com where there is a 5MA /13MA crossover predefined scan (among others).
What I used on these posts was a predefined scan on Stockcharts.com for "high volume gainers", and made a list of those in my price range. Also made a list from the StockTA crossover stocks. Then I went to AskResearch and set my MA parameters (as well as others you want) to look at the charts and read the actual MA values which are shown on each chart.But I also look at stochastics (5,3,3), Williams %R. Money flow, rate of change,news, etc...for confirmations.
It may sound complicated, but it really is not. In my low-price price range, my list may only be a dozen or so stocks.
Now, day-traders may know of subscription websites where you can do real-time scans, but I have never investigated that possibility.

Your choice of MA's is close enough to mine so that results should be similar. Some people use Bollinger bands and look for narrow bands, but I think the theory is about the same as coincident MA's.

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An example of a stock having had good buying opportunities when MA's coincide has been LPSN.
In the past 3 months, there were about 4 instances when MA5 and MA10 were very close. MA 15 did not coincide because the stock has been in a general uptrend and the pullbacks were just to the MA5/MA10 lines.The OBV line was also in a general uptrend.Each time, the stock was good for at least a 1-week swing trade although, obviously, money would have been made by just holding the stock.
I'm just using LPSN as an on-going example that the system has possibilities.

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gohigh
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Using MA's sounds good in theory, but when you actually try and use them it rarely works out like you thought it would. Usually, by the time the MA's cross, and you put your order in, you've already missed the bottom. And when you try and sell under a similar situation, everybody is pretty much bailing ahead of you. I know, because I've backtested lots and lots of data, and sometimes what seems like a good system on paper doesn't pan out in reality. I like that you've suggested using other indicators, like volume to help decide when you're getting a good signal as opposed to a false one.
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gohigh
I agree that crossing MA's do not catch the bottom, but the intent is to catch those stocks that have started their upturn.Actually, I do not know of any system that consistently catches absolute bottoms. I know that some people use low RSI, oversold stochastics, oversold Williams %R, but those too can result in whipsaws.
In your extensive backtesting what system, if any, has shown to be the superior to others?

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podcaster
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quote:
Originally posted by mcw_yuma:
Hi Who,
Am really interested in finding a program or web-based provider of a real-time stock screen/scanner.
Any help is appreciated. Cheers,
Mike

Yuma--- i haven't seen any real-time scans out there either. like Who says, mostly just EOD. BUT, if you only have 2 or 3 stocks you're watching, you could tab and chart ma's real-time pretty fast using your spreadsheet program. get the base data for a year or whatever from naz, paste it in, then intraday just replace data and create chart...
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Then too,if you have a list of stocks from an EOD scan,you can get 20-minute delayed intraday charts from several sites, including ASKResearch.
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gohigh
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If I had a system which consitstantly picked the bottom, I probably wouldn't reveal it to anyone Who. [Wink] I don't think such a system exists, because there are always factors that can't be measured with the data we have, and therefore there will always appear to be some randomness as to whether an actual bottom has been reached, or whether it's just a stepping stone to the next level down.

I think using a combination of indicators to weed out apparent randomness is the best way to do it. Which is basically what you're saying.

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gohigh

That's why I don't try to pick bottoms of stocks that are in a downtrend. It's true that sometimes you can anticipate that a stock will have a bounce because it's so overdold , but usually it'll bounce for a day or two only.
My preference is a stock that has been going sideways for a week or so, and then breaks out to the upside on heavy volume. My observation is that the breakout happens quite often when the short-term MA's are very close together.But I try to buy the day after the actual breakout on heavy volume,if the price didn't go up more than say 10%. Also,I check the news on the stock, because a sustainable breakout is usually related to some good news. So there's actually more to it than just picking any stock from a scan.

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macdrsirules
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I like to keep it simple. I try to look into stocks that are in an uptrend or at least sideways also. I don't even try to find the bottom of a stock in a downtrend very often(my last attempt was FONR a few weeks back, didnt work). If the indicators I use do not match with the price then I generally won't trade the stock.

I use RSI(14) or (10) or slow sto to help identify the bottom. This along with the candlesticks is just about it for me.

A couple quick examples.
http://stockcharts.com/def/servlet/SC.web?c=BBV,uu[h,a]daclyyay[pd20,2!b200][vc60][iUh14,3!Lc20]&pref=G
Very easy to see how slo sto marks bottom pretty accurately. Now take a look at the same chart using RSI(14).
http://stockcharts.com/def/servlet/SC.web?c=BBV,uu[h,a]daclyyay[pd20,2!b200][vc60][iUb14!Lc20]&pref=G
Definitely a little more tricky to find that bottom. Use the indicator that matches the chart.

One more, notice how the DOJI helps to mark support and resistance along with slo sto.
http://stockcharts.com/def/servlet/SC.web?c=DROOY,uu[h,a]daclyyay[db][pd20,2!b200][vc60][iUh14,3!La12,26,9]&pref=G

My method in a nutshell. Pretty simple really.

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macdrsirules
Now if you find about half a dozen stocks that behave as consistently as your example of BBV, you could make a living off of them .
I too like stochastics and think they give clear-cut signals if the period is not set too short. I think that some swing traders set the periods too short, and while they may be good for day-traders,it results in too many whipsaws for swing traders.I know, I've been guilty of that too !

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That is very true. Stochastics can give many false signals. It all depends on the chart. If the signals that sto gives are whipsawish then I would not use sto, instead I would take a close look at RSI (14) or (10) as this gives fewer but more reliable signals. That is what I mean by if the indicators match the chart. If too many whipsaws still occur then I would not mess around with that stock.
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R1 Man
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You have an interesting method. Can you post a chart by any chance....You don't need to explain it....I will understand....I just want to see a chart.

Thanks!

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R1Man

Macdrsirules provided some links to charts a couple of posts ago, which I think are pretty good.I think the slow stochastic (14,3) and rsi (14) signals are pretty clear.I personnaly don't rely on dojis, but then I'm not an expert on candlesticks.

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STXN....3.81

RAE.....3.60

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I like to surf the internet looking for forums on the stock market. Not so much for other people's stock picks, but for different systems that they may use to pick stocks.
I happened upon a discussion where several people had paid several thousand dollars (can you imagine?)to attend a three-day seminar on what sounded like a "black box" stock-picking system. The problem was that they promptly lost a good portion of their remaining money shortly after using the system. Apparently they were "newbies" to the stock market and fell prey to fast-talking scammers.The probable main reason that they lost their money was that they didn't know what they were doing.They would have been a lot better off buying a $50 book. But even that expense is not really necessary anymore. There's more than enough information available, for free, on the internet.
I also lurk on sites where they discuss stock selection filters. Some filters are a full page in length. Ridiculous.
Now,I'm not bashing filters. But any filter more than a few lines long is probably unnecessary. In fact,there are several free sites that provide basic filters that are adequate. The fact is that it's not really the filter or system that matters, but how you use it. So you might as well keep it simple.

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CBRX.....5.00

IMMU.....3.20

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Looks like it may have reached bottom on the weekly chart:

STEM....4.02

Gained over 10% today, so it may pull back some tomorrow.

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There are probably hundreds of books written on picking individual stocks. In spite of this, I read that the majority of stock traders lose money. So it may be that, although stock selection theories are well and good, it is the wrong place to start your research.
In my opinion,research in the stock market should be organized from the top down.That is,it should start with the present behavior of the various sectors or industries.Although the overall market may be moving in one direction or the other,the individual sectors have their own agenda, so to speak.
I like to look at the present behavior of the technology,healthcare,oil,and gold/silver indexes and try to select stocks in whichever sector is moving,or appears to be ready to move, in my desired direction.
I keep a frequently-updated list of stocks, within my price range,in each of the four indexes ranked by relative strength.But that does not necessarily mean that I buy the best performing stock(nor the worst). I'm neither a momentum player,nor a bottom picker.I try to pick a stock that has come slightly off a bottom in a sector that has done likewise.
The idea is to do my trading like an organized business,and not pick stocks helter-skelter.

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