| Tracking stocks with price ratio's and watchlists |
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Tracking stocks with price ratio's and watchlists Overview: What happens after you have a list of stocks you want to trade? In this newsletter we will highlight the application of watchlists to cover a pool of potential stocks as well as talk about simple moving averages and growth averages. This "pool" of stocks will be the stocks that comprise the DJIA and samples from that list will be used to highlight percent changes, simple moving averages and growth averages. In this newsletter, there will be a lot of references towards percent change over (5,20,50,100) day averages and simple moving averages. The percent change over (5,20,50,100) day average refers to the price difference from the last reported close and the (5,20,50,100) day average price. The watchlist: To start, the trader will need some type of watchlist system to track potential stocks. Depending on your service provider, features may vary. In this case, we will be using the watchlists provided by StockTools.
The main feature here is the percent change. With a quick glance, we can see which stocks are moving in what direction and how fast. Here is a watchlist of the DJIA 30 stocks, I have sorted the list by growth of the 50 day price average (I will explain in further detail lower)
The watchlist is broken down into several columns, the columns of interest are the "percent change" column which will tell us about the trend of the price and whether we want to look at that stock or not.
First is the % Close Change, this refers to the price change since last close. In the case of GM, the stock closed another 2.887% down from the previous trading day. The next item of interest is the 5 day ave. This is the percentage difference from last close compared to the 5 day price average (sum of last 5 closes divided by 5). In the case of GM, the most recent close is 3% lower than the 5 day price average.
The 20 day ave is the same in concept as the 5 day ave, the only difference in that a 20 day price average is used. In the case of GM, the most recent close is 8% lower than the 20 day price average.
The 50 day ave gives us an idea of the medium to long term direction of the trend, as with the other averages, the same concepts applies. To see an example of how these percentages apply in terms of price charts, lets look at GM. The watchlist provided us with the following price movement information:
When we look at the chart for GM, we can see where the numbers provided by the watchlists apply to a real chart. A 17% drop over 50 days for a blue chip of this magnitude is huge, a definite bear until GM can return to profitability and regain some market share. Having a look at our top mover (INTC, Intel) we get a completely different picture, something more positive.
For the trend follower, a nice clean entry pattern emerges around November 20th, prior to the last move there was also a volume increase which confirms that the trend has changed. This volume increase also give us the indication that this will have some upward momentum. Screening for your stocks based on growth: If you want to find all stocks with the same percentage growth as INTC, use the following screen:
You may also want to include some close ranges to reduce this list (ie: close between 10-50$) and some minimum volume. You may also want to include a technical, however this will reduce your list significantly, in the INTC chart, include the following technicals:
Using these price ratio's to track stocks is useful, applying them to screening will give you the chart patterns you are looking for. |
