Good Relative Strength Stocks for Day or Swing Trading

March 7, 2012

Uncategorized

By Geoff Bysshe

Today the markets gap down big and stayed down (see image to the right, click to enlarge).  This the first time this has happened in months and the move is against some strongly upward trending daily moving averages. There are a lot of day trading and swing trading strategies that can take advantage of this market weakness by trading the stocks that demonstrate good relative strength during a market correction.

Here is a good scan (and some good stocks today) for finding stocks with good relative strength on a big gap down day. Since the market not only closed but also gapped below it prior day low I can determine “good relative strength” in two simple ways.

  1. Today’s low is greater than yesterday’s low. This means the stock was not as weak as the market on the open (see the setting circled in the image below).
  2. The stock is trading near a 6-month high. This means it is likely to have a good trend or consolidation at a high level.  The setting (see below) that I use in HotScans is one that allows me to require the stock to be trading within a certain number of average ranges from the key reference point. In this case I’ve selected the 6-month high as my key reference point and 3 average ranges as the maximum distance the stock can be from that level to qualify.

If you look through these results, you’ll find quite a few very bullish daily charts! And a market correction is a great time to be sorting out the weak from the strong.

If you’re a HotScans user I’d suggest copying this list into a portfolio so you can then scan this specific list for the stocks that get off to a good start and perform well today. A few scans you can use for that would be to look for opening range breakouts, or trading over the prior day high (which would now be today’s high, or if the market continues lower you can look for the ones that continue to hold up strong.

Other modifications on this scan that will find more patterns are to look sort the table by the stocks that are up the most rather than by most unusual volume. If you want to narrow the list you may increase the requirements in the basic filters to specify stocks with higher average range or average volume, or you may want to require that the stock close near its high of the day so you’ve required that the stock close strong.

Click image to enlarge: