HOW I USE STOCKCHARTS' "CANDLEGLANCE" TO SPOT SWING TRADING OPPORTUNITIES 

During the last two weeks I've written about how I combine Livecharts with streaming quotes from Interactive brokers in a two screen system to watch the market in real time. By day I am a fan of Livecharts because of the speed with which I can change time frames. By night, however, I am a devotee of Stockcharts. That is because of the ability it gives me to scan 700 stocks of my choice in about an hour and then analyze selected candidates in great depth. 

Readers of this newsletter are already familiar with Stockcharts since almost all the charts in the weekly Swing Trader come from this website. Readers not familiar with the site can try a free "lite" version by going to the Stockcharts home page. Please remember my previous disclaimer. I derive no financial benefit from describing this website.

A little personal history. For some time, I subscribed to Stockcharts basic service, which was $9.95 a month. This service level allowed me to track about 100 stocks, a number I ultimately found limiting. When I upgraded to the $19.95 per month subscription, the number of stocks I could follow expanded exponentially. As a subscriber to the premium service, I am allowed 100 portfolios each containing up to 500 stocks. That is a lot of issues!

Right now I have two main portfolios and a few smaller ones. The two main portfolios contain about 700 stocks. I add perhaps 10 to 15 stocks a month and delete a few as well. For me, keeping a list of stocks which are consistently followed over time is essential for successful swing trading. That way I can learn their "personalities," trading behavior, technical patterns and breakout levels and be ready to trade them when the right moment comes.

Stockcharts gives me the option of scanning these 700 stocks in many formats. By far my favorite is called Candleglance. The Candleglance format brings up sequential pages of a 30 stock "chartbook" that eventually comprises a 500 stock portfolio. There are four different pre-set time lengths that you can scan stocks: two days, two months, six months and one year. A point and figure option is also available. 

The format I use most often use is the default chart of two months. It contains a price chart in candlestick format, volume, and 20- as well 50-day simple moving averages. A single indicator from a pre-selected list can be added to the scan.

Reviewing charts in Candleglance enables me to quickly evaluate a consistent universe of stocks. Even though the format is simplied, many technical patterns emerge from the Candleglance charts. As I scan, I search for uptrends and downtrends, resistance levels about to break and support levels about to give way. I look for rectangles and triangles about to be resolved and other technical "profitunities." 

I typically scan in accordance with the existing Minor and Intermediate S&P 500 trend. In a rising market I search for stocks above an upward sloping 50-day moving average and stocks where the 20-day is about to cross above the 50-day. I also look for significant reversal candles such as dojis, hammers, hangmen, morning and evening stars which tell me when an uptrend is about to end and profits should be taken. I take careful note of volume surges, particularly when there is also a large move in price. 

Typically I add one of four indicators to my scan. If the market is overbought or oversold and I sense it is beginning to reverse, I will use Williams %R or stochastics to identify those issues which are apt to lead the pack. The Price Relative to the S&P 500 indicator is very useful to pinpoint stocks which are underperforming in a weak market or outperforming in a strong one. I find that trendline breaks in the relative strength line are highly significant and frequently precede breaks in the price trend. In a consolidating market, I find ADX works very well. I look for ADX crossovers as signs of new up or downtrends. When the ADX line is well above 20, a strong existing trend is identified and I examine how much further it might be able to go. 

While scanning the 700 stocks, I write down candidates which look particularly promising. I then look at the technical patterns in detail on full size charts with all the indicators I typically present in the newsletter: Rate of Change, ADX, MACD, Price Relative, Stochastics, CCI, RSI and a variety of moving averages. I try to correlate all this information into a technical judgment and then present what seem like the most promising situations as trade recommendations or stocks to watch. 

Adding new stocks to the ones I already watch is as easy as hitting the edit key and typing in 10 or 15 new issues. Stockcharts has numerous other useful features. I can also scan the day's activity to look for stock that have gained or declined on usual volume. I can look for up and down gaps or in a market reversing to the upside identify all the stocks of that day with a bullish engulfing candle. There are many other useful features to this site and the best way to familiarize yourself would be to take a few minutes and explore the free version.

In contrast to Livecharts, which I wrote about last week, the site is, in my experience, glitch free. The few times I have written for support I have received a rapid reply. My only complaint, and it is a minor one, is that the name of the stock and associated information blocks the data in the upper left hand corner of the chart. That sometimes makes drawing a trendline difficult and requires that the chart be started earlier than necessary to accurately establish the trendline. If you are searching for a quick way to review a consistent portfolio of stocks, Stockcharts certainly fits the bill. If you are not familiar with it, it is worth investing a few minutes of your time to check out its many features.

Good trading!

Dr. Melvin Pasternak
Editor
The StreetAuthority Swing Trader