Chartmill | 01 Chartmill Technical Rating and Setup Quality scores

01 Chartmill Technical Rating and Setup Quality scores

The ChartMill analyzer reports produce 2 scores that qualify a stock from a technical perspective:

  1. A Technical Rating: a score between 0 and 10 quantifying the technical health of a stock. The higher the rating, the better the technical health of the stock. The technical rating is also oriented towards long setups.
  2. A Setup Rating: a score between 0 and 10  quantifying  the quality of the setup pattern. The setup score checks whether a good entry and exit point can be found on the chart.

We’ll give more details on the scores below. The reason why these a separate scores is that a stock showing good technicals does not automatically make a good setup. A stock with decent technicals can for instance be extended, making it hard to find a good entry and exit point.  But also the inverse is possible: a stock with a lesser technical rating can still make a great setup.

The Chartmill Technical Rating

The ChartMill Technical Rating quantifies the technical health of the stock, taking into account both the long and short term timeframes, as well as the position of the stock in the universe of stocks. The score takes into account the items listed below among other things:

  • The relative strength of the stock.
  • The historical relative strength and its evolution
  • The Long and Short term trend.
  • Several moving averages and the position of the price compared to them.

The ChartMill Technical Rating can also be used to identify market leaders. The higher the score, the stronger the trend. Below are some examples of stocks scoring a perfect 10 at the time of writing:

TA10_3
TA10_3
TA10_3
TA10_3

The charts above are weekly charts, so they show how only a nicely distributed longer term trend leads to a perfect TA score.

 

The Chartmill Setup Quality Score

The chartmill Setup Quality score quantifies the quality of the setup pattern. Typically a good setup is available when the stock is forming some kind of consolidation/base pattern. Several properties are taken into account:

  • Whether or not current prices are not too far from short term moving averages.
  • Whether or not recent prices are in the same area
  • Whether or not there is a support zone below the current price
  • Whether or not volatility is decreasing
  • Bonus points are given when for instance large players are entering the stock.
  • More Bonus points are given for recent pocket pivots.

Below are some examples of stocks with a high ChartMill Setup Quality Rating:

TA10_3
TA10_3
TA10_3
TA10_3

These are daily charts, a high setup score indicates some kind of price consolidation, so you will see prices trading in a narrow range.

The Breakout Setups in the Analyzer

The Technical Breakout Setups tab in the analyzer combines the ChartMill Technical Rating and the Chartmill Setup Quality Rating to present the best breakout setups in the market each day. These are found by filtering for stocks which have both a high TA Rating and a high Setup Rating. Combining both ratings will present technical setups in the best performing stocks in the market.

Using the Technical and Setup rating values in the screener.

These properties can also be used in the stock screener. They can be used in various ways:

  • Screening: you can screen for stocks with specific TA and Setup ratings.
  • Sorting: the results of any screen can be sorted by TA or Setup Quality
  • Viewing: you can view the TA and Setup Rating of any stock in the chartmill database.

Screening

In the screener, on the ‘More Technical’ tab, 2 fields have been added:

Screen

You can select the values you need for your screen. This example lists all stocks with a Technical Rating of at least 8 and a Setup Rating of at least 8. Note that only a limited number of stocks might be listed due to market conditions.

Sorting

The output of any screen can be sorted by Technical Rating or Setup Quality. This is handy as it will list the best quality setups first, so you will save time going over all stocks one by one to discover a good setup. To sort your results, change the ‘Order By’ property in the settings of the output of the screen:

Sort

 

This example shows the output of the Strong Stocks near New High screen sorted by Setup Quality. As you can also read in the documentation of the screen, this is typically a screen that does not present only setups. So sorting them can save you some time.

Viewing

Finally, you can see the Technical Rating and Setup Quality values for every stock in almost every view. They are displayed in the tables or on the charts.