In this article I go over a basic swing trading momentum screen based purely on technical filters. This is one of the screen filters used for our daily "trading ideas" which are published on ourInstagram and/or Facebook before the market opens. All of the retained setups are generated by running a number of basic screens in ChartMill on a daily basis. After this first selection, a further manual screening follows after which one or more setups are selected as "trading ideas".
We differentiate between 'Breakout Setups' and 'Retracement Setups', depending on the market circumstances, but in this article we will only concentrate on the Breakout Setups. The retracement setups will be dealt with in a separate article.
In terms of basic settings, volume and minimum price are especially important. I always use $5 as the minimum price and a trading volume of at least 300,000. After all, you want to be sure that the shares you are trading have enough liquidity so that buying and selling goes smoothly.
To define the outbreak itself, there are several options through the 'Performance' menu. Then select the 'Signal' tab.
If the market is in a strong bullish uptrend (as is the case now at the time of publishing this article) it is best to select the 'New 52 Week High' signal. If the number of shares is too limited, you can also opt for 'New 10 Day High' or 'New 20 Day High'.
For the volume filter, I use the 'indicators' menu. select the 'Volume Increase' tab.
I define that the volume of the last trading day (the breakout candle) must be at least 100% higher than the volume of the previous trading day.
In the same dropdown menu, I also select that the volume must be at least 50% higher than the average volume of the past 50 trading days. In this way, I combine a short- and long-term volume filter to make the results more robust.
Important! The stocks that survive this basic selection are not just all valid 'long setups'!
All selected stocks from the link above had reached their new highest annual price on sharply increased volume by the date of October 28. But to be retained as effective breakout setups, they must also pass a manual selection. The workflow to get to that final selection of just one or a few stocks will be covered in a separate video soon.
In this case, Arbest Corp (ticker ARCB) was retained as a 'long trading idea' for the next trading day and posted as a 'buy setup' on our instagram page on october 29, 2021.
A few more specific considerations that are important when selecting breakout setups :
Finally, these shared "trading ideas" should in no way be considered as actual investment advice. They only serve as an example, to illustrate what's possible with a screening and analysis tool like ChartMill. Above all, remember that a good entry is but one part of a successful trading strategy (but it does help of course :-). Your position sizing, exposed capital and risk linked to your stoploss are at least of equal importance.
Meanwhile, trade safe!