Chartmill | Finding horizontal bases using Chartmill Channels.

Finding horizontal bases using Chartmill Channels.

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Chartmill Channels

Chartmill channels are created to find the optimal channel with a maximum length and a minimum width. Some more info can be found here, but they were discussed in detail in an article for Traders Magazine. A copy can be found here.

Trend Intensity

When combined with Trend Intensity, this results in a list of stocks that are showing a strong uptrend, but are forming a horizontal base at the moment. The shared screen requires a minimum trend intensity of 105. As explained here, this simply means that the 7 day moving average is currently at least 5% above the 65 day moving average. Or in other words: current prices are quite far above a longer term average, which means that the stock recently made a strong move up.

Further configuration

The screen sets the minimum length of the channel to 20 days. The maximum width of the channel is set to 8%. And the minimum strength of the channel lines are set to 3. This means that for the last 20 days, prices are stuck inside a channel of maximum 8%. The strength of a channel line measures how many times the price has been near the channel line. So the higher the strength number, the more times it has proven to be support or resistance in the past. You can easily play around with these settings, for instance by allowing the channel to be slightly wider or by selecting only channels with even more strength.

Results

MAR AGN

 

MAR en AGN are 2 examples that roll out of the screen. Both show an initial run up and are now forming a base. Both have tested the upper boundary of the channel multiple times.

Further tuning

As always, many variations and further filtering are possible.

  • The same screen, but only on strong stocks.
  • The same screen, but where the base contains at least one or more pocket pivot. This would further filter on decent price/volume accumulation patterns inside the base formation.
  • The same screen, but with the requirement that large players are accumulating inside the base. This can be achieved by using the Effective Volume filters.