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Spotting trend changes using linear regression channel sorts Topic Rating:
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Sean_W
Posted : Wednesday, October 13, 2004 8:57:58 AM

Worden Trainer

Joined: 10/1/2004
Posts: 68
Location: Worden Brothers, Inc.
Author: Sean Wander

Press the Play button on the bottom of the video to start.










keywords: Channel Linear Regression Breakout Indicators Visual Sorting Channel Sort Indicator Sorting Flagging Watchlist Ascending Descending trend reversal change

To view this video you must have Macromedia Flash Player and Microsoft Internet Explorer 5+
KenM
Posted : Wednesday, March 02, 2005 10:38:07 PM
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Joined: 10/7/2004
Posts: 4
Great stuff Sean! I just found this. I hope you don't have plans to delete this, as I need some time to work with it.

Thanks.
Craig_S
Posted : Wednesday, March 02, 2005 10:52:42 PM


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Joined: 10/1/2004
Posts: 18,819
You will not see any of the videos here deleted. Here are some other videos that you may enjoy along the same vein:

Learn to quickly identify when price and volume are in or out of step

Sort using envelopes, regression channels and Bollinger bands

- Craig
Here to Help!
MDiep
Posted : Friday, March 25, 2005 1:05:24 AM
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Joined: 12/30/2004
Posts: 33
Hi Sean,
A great video! Itried it out and it works fine. You made a statement: "Anytime you have a sort value above a hundred, you have a breakout pattern"
I woulld like to understand why that is, how come? Could you please explain it? I would appreciate that.
Thanks in advance, MDiep
Craig_S
Posted : Friday, March 25, 2005 9:17:52 AM


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I believe he is defining a break out as any stock closing above the top of the LR channel. Technically these stocks would be breaking out of the channel but may not be a "break out" as we sometimes think of them.

- Craig
Here to Help!
MDiep
Posted : Friday, March 25, 2005 1:10:23 PM
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Joined: 12/30/2004
Posts: 33
Yes, I meant a breakout out of the LR channel, but what is then the realationshiop of the sort value of 100?
Which formula is in effect here?
MDiep
Doug_H
Posted : Friday, March 25, 2005 1:16:37 PM


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Posts: 4,308
Whenever you do a channel sort (such as with linear regression channels), values of zero means the stock is closing right at the linear regression line. Stocks returning values of 100 are closing 1 channel width above the linear regression line...in other words, right at the top channel line. Values above 100 mean the close is currently above the top channel line. For instance, if a stock returns a value of 200, the close is currently 2 channel widths above the linear regression line...300 would be 3 channel widths above the linear regression line.

The negative numbers work as well. -100 is one channel width below the linear regression line...200 is 2 channel widths below, etc..

- Doug
Teaching Online!
Craig_S
Posted : Friday, March 25, 2005 1:26:57 PM


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Posts: 18,819
Think of the number as a percentage of the channel width. One channel width is the distance from the center to the top of the channel.

A stock that returns a value of 110 is 110% of a channel width from the center. If the top of the channel is 100% of a channel width from the center then your stock is farther from the center.

Make sense?

- Craig
Here to Help!
MDiep
Posted : Friday, March 25, 2005 8:33:23 PM
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Posts: 33
Doug and Craig,
All right! That explains it for me, the light went on (lol). Thanks a bunch, that is very helpful since I like the LR channel, but never noticed this.
Many thanks, MDiep
Doug_H
Posted : Friday, March 25, 2005 9:06:55 PM


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You're welcome, MDiep! It's a pretty cool technique! Glad you got it working for you.

- Doug
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tom32841
Posted : Saturday, July 16, 2005 6:28:44 PM
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Joined: 11/24/2004
Posts: 11
I have used the same criteria and settings that you use in the video but a lot of the results show assending LR lines. Am i doing something wrong?
Thanks
Craig_S
Posted : Sunday, July 17, 2005 3:28:01 PM


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Posts: 18,819
Be sure you are sorting by the SLOPE of the LR channel and that you are flagging the right ones. I think you are missing a step. When you sort by a channel, it does not default to the slope method, you must change it.

Watch the video again, pause at each step and try it, and you should see where you are missing a step.

- Craig
Here to Help!
fsyong
Posted : Monday, August 01, 2005 10:22:30 PM
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Joined: 5/3/2005
Posts: 11
great job!! is there any way to put this in PCF?

Doug_H
Posted : Monday, August 01, 2005 11:20:06 PM


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PCF's for linear regression lines can be quite complex. Please check out the following thread to get some idea.

Linear Regression for a past date

You can also do a search of the forums to find additional information about linear regression PCF's.

I do think the sorts described in the video are really the best way to accomplish finding trend changes with linear regression lines.

- Doug
Teaching Online!
Bruce_L
Posted : Tuesday, August 02, 2005 7:40:38 PM


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Posts: 65,138
fsyong,
The video outlines a technique that can be easily adjusted. While not as simple to set up, it is possible to produce the exact same list of symbols as produced in the video using two Personal Criteria Formulas as EasyScan conditions. Once it is set up, it should usually require less time and work on a day-to-day basis, but it is fairly complicated to adjust the Linear Regression.

LR Slope (50-Period):
(24.5*C +23.5*C1 +22.5*C2 +21.5*C3 +20.5*C4 +19.5*C5 +18.5*C6 +17.5*C7 +16.5*C8 +15.5*C9 +14.5*C10 +13.5*C11 +12.5*C12 +11.5*C13 +10.5*C14 +9.5*C15 +8.5*C16 +7.5*C17 +6.5*C18 +5.5*C19 +4.5*C20 +3.5*C21 +2.5*C22 +1.5*C23 +0.5*C24 -0.5*C25 -1.5*C26 -2.5*C27 -3.5*C28 -4.5*C29 -5.5*C30 -6.5*C31 -7.5*C32 -8.5*C33 -9.5*C34 -10.5*C35 -11.5*C36 -12.5*C37 -13.5*C38 -14.5*C39 -15.5*C40 -16.5*C41 -17.5*C42 -18.5*C43 -19.5*C44 -20.5*C45 -21.5*C46 -22.5*C47 -23.5*C48 -24.5*C49)/10412.5

LR Channel Sort (50-Period):
20000*(C -(AVGC50 +24.5*(24.5*C +23.5*C1 +22.5*C2 +21.5*C3 +20.5*C4 +19.5*C5 +18.5*C6 +17.5*C7 +16.5*C8 +15.5*C9 +14.5*C10 +13.5*C11 +12.5*C12 +11.5*C13 +10.5*C14 +9.5*C15 +8.5*C16 +7.5*C17 +6.5*C18 +5.5*C19 +4.5*C20 +3.5*C21 +2.5*C22 +1.5*C23 +0.5*C24 -0.5*C25 -1.5*C26 -2.5*C27 -3.5*C28 -4.5*C29 -5.5*C30 -6.5*C31 -7.5*C32 -8.5*C33 -9.5*C34 -10.5*C35 -11.5*C36 -12.5*C37 -13.5*C38 -14.5*C39 -15.5*C40 -16.5*C41 -17.5*C42 -18.5*C43 -19.5*C44 -20.5*C45 -21.5*C46 -22.5*C47 -23.5*C48 -24.5*C49)/10412.5))/(ABS(C48 -AVGC2.48) +ABS(C47 -AVGC3.47) +ABS(C46 -AVGC4.46) +ABS(C45 -AVGC5.45) +ABS(C44 -AVGC6.44) +ABS(C43 -AVGC7.43) +ABS(C42 -AVGC8.42) +ABS(C41 -AVGC9.41) +ABS(C40 -AVGC10.40) +ABS(C39 -AVGC11.39) +ABS(C38 -AVGC12.38) +ABS(C37 -AVGC13.37) +ABS(C36 -AVGC14.36) +ABS(C35 -AVGC15.35) +ABS(C34 -AVGC16.34) +ABS(C33 -AVGC17.33) +ABS(C32 -AVGC18.32) +ABS(C31 -AVGC19.31) +ABS(C30 -AVGC20.30) +ABS(C29 -AVGC21.29) +ABS(C28 -AVGC22.28) +ABS(C27 -AVGC23.27) +ABS(C26 -AVGC24.26) +ABS(C25 -AVGC25.25) +ABS(C24 -AVGC26.24) +ABS(C23 -AVGC27.23) +ABS(C22 -AVGC28.22) +ABS(C21 -AVGC29.21) +ABS(C20 -AVGC30.20) +ABS(C19 -AVGC31.19) +ABS(C18 -AVGC32.18) +ABS(C17 -AVGC33.17) +ABS(C16 -AVGC34.16) +ABS(C15 -AVGC35.15) +ABS(C14 -AVGC36.14) +ABS(C13 -AVGC37.13) +ABS(C12 -AVGC38.12) +ABS(C11 -AVGC39.11) +ABS(C10 -AVGC40.10) +ABS(C9 -AVGC41.9) +ABS(C8 -AVGC42.8) +ABS(C7 -AVGC43.7) +ABS(C6 -AVGC44.6) +ABS(C5 -AVGC45.5) +ABS(C4 -AVGC46.4) +ABS(C3 -AVGC47.3) +ABS(C2 -AVGC48.2) +ABS(C1 -AVGC49.1) +ABS(C -AVGC50))/3

EasyScan Conditons
-Watchlist: Nasdaq 100 Component Stocks
-Linear Regression Slope: Value: Min to -0.01 (or the smallest available negative value)
-LR Channel Sort: Value: 100 to Max

You will probably want to sort the EasyScan by the LR Channel Sort PCF. Obviously, it is possible to have additional conditions or choose a different Watchlist to Scan (the time advantage gained by using this method increases with the size of the Watchlist). You may want to watch the following videos before creating the PCFs and EasyScan:

How to create a Personal Criteria Forumula (PCF)
Using EasyScan to find stocks that meet your own criteria
Constructing more versatile and reusable Personal Criteria Formulas

The following forum topics contain the information necessary to adjust the Linear Regression Period and Width in the PCFs:

Using Linear Regression vs Classical Peaks/Valleys for Divergence Analysis
Linear regression channel calculations

-Bruce
Personal Criteria Formulas
TC2000 Support Articles
fsyong
Posted : Tuesday, August 02, 2005 9:57:14 PM
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Joined: 5/3/2005
Posts: 11
I know your guy can do it.

everytime I posted out the questions, I know your guys will answer in mins.

Thanks.

Bruce_L
Posted : Tuesday, August 02, 2005 10:03:06 PM


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Joined: 10/7/2004
Posts: 65,138
You're welcome.

-Bruce
Personal Criteria Formulas
TC2000 Support Articles
ajclarke88
Posted : Tuesday, October 18, 2005 4:35:47 PM
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Joined: 1/5/2005
Posts: 24
I liked the results as posted in the video...and went ahead and did a trial today using the Nasdaq 100. The results are not as clear-cut as those of the video.
For example, in the ending sort, I have the following:
SBUX = 317.83 has bar above channel
AMZB = 251.47 has ending bars below channel
YHOO = 243.65 has ending bars below channel

AMAT = 156.56 has bar ending above channel.

As I go down the list, the results continue to be in reverse order of what I expect to find, especially in the top 10 stocks sorted.

Please explain why I'm getting these results.

I truly appreciate your videos and all the effort you put forth for the benefit of the users. They are all great. Sorry to trouble with this.

Tony
Doug_H
Posted : Tuesday, October 18, 2005 4:39:06 PM


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Posts: 4,308
What period linear regression are you plotting? What setting are you using for width? For extension?

- Doug
Teaching Online!
ajclarke88
Posted : Tuesday, October 18, 2005 5:23:38 PM
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Joined: 1/5/2005
Posts: 24
OOPs...I guess I have been too long on the PC and got mesmerized by all the screens I had been watching! Somehow, I was using a past chart when looking at the results of the sorts...and I didn't realize this until I went to do some other work and on returning noticed the flashing warning on the top right of the screen. I do appologize for my oversight!
The results are quite in order with the reading of the sort.
Best regards,

Tony
Doug_H
Posted : Tuesday, October 18, 2005 5:25:35 PM


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Posts: 4,308
Glad to hear it's all straightened out! I've done that countless times myself!

- Doug
Teaching Online!
DavidBSchoon
Posted : Friday, January 27, 2006 2:00:48 AM
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Joined: 10/7/2004
Posts: 45
Great video Gentlemen, many variations, thank you. 5 Stars!

DavidBSchoon
rAmJET
Posted : Tuesday, February 07, 2006 6:29:24 PM
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Joined: 10/7/2004
Posts: 133
I notice that DW uses std deviation channel lines quite a bit. Is it possible to scan/filter for stocks that have a balanced oscillation; for example, a stock that channels 20 dollars in width; for instance, 10.00 to the UPside and 10.00 dollars to the DNside? If so, how would I correlate std deviation to a dollar (price) figure to determine that focus on price in conjunction with these std deviation amts to construct a std deviation channel? How would I write a scan like that?

I would be interested in this that would set up a balanced straddle play. Conversely, if this can be done might I also find erratic stock movements. For example a stock that has broken through resistance and is now channeling in an out of bounds range above its previous resistance which might be a potential good strangle play?
Note: I need to ask will future tc2005 (editions/versions) include option chain pull down? also, are the Worden Bros (DW, PW, CW) working on interfacing trade platform with tc2005 to where when we place trades they could reflect on the chart the prices we set as limit or market prices so we can target our trade in progress visually off the chart? Have a visual interface to place buy/sell stops, etc.

I clicked on IMAGE intending to show a foto of what I mean yet the image icon is the same as the URL link icon as tool bar to where we post these mssges. I thought an image would be a browse feature to attach in a few images with my mssge here? Why are image and link icon the same for posting messages? In other words, they are redundant not unique icon features. Maybe this needs to be fixed?
Craig_S
Posted : Tuesday, February 07, 2006 6:46:15 PM


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Joined: 10/1/2004
Posts: 18,819
For starters, check out this video...

Scan for stocks bouncing in a lateral channel

Take special note of the PCF used in the WatchList tab.

Let me know if this does it for you.

- Craig
Here to Help!
teto
Posted : Saturday, May 26, 2007 2:51:32 PM
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Posts: 9
great-thanx
BRGZZ
Posted : Tuesday, October 20, 2009 9:30:23 AM
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Joined: 6/1/2006
Posts: 48
I've run the Linear Regression sort as in the video, using the Telechart's ETFs list as the watchlist, and came up with 123 ETFs. Is there a way to find the ETFs which fit the sort, but have now pulled back to the 10-day price's SMA? 
So maybe I have to sort based on the linear regression which occurred like 1 to 2 weeks back, and run a PCF (or Scan?) to find the ones that have now pulled back to the 10-day SMA. How can I do that? Thanks.
Bruce_L
Posted : Tuesday, October 20, 2009 11:18:49 AM


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Posts: 65,138
BRGZZ,
You can adjust the technique to test for the Slope being negative at some point in the past by setting the Extension in the Linear Regression Channel to something greater than 0 (you'll want to base this on how far in the past you wish to look).

The Channel Sort will still find items that are currently above the Linear Regression Channel. If you want to also test if it is at or above the 10-Period Simple Moving Average, you could use the following Personal Criteria Formula as an EasyScan Condition:

How to create a Personal Criteria Forumula (PCF)
Using EasyScan to find stocks that meet your own criteria

C >= AVGC10

-Bruce
Personal Criteria Formulas
TC2000 Support Articles
shevkoplyas
Posted : Friday, November 27, 2009 1:16:10 AM

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Joined: 11/26/2009
Posts: 16
Hi! And Thank you for your great presentation. Simple way to do quite powerfull thing heh! I wonder how long would it take to do the same task with my pencil and paper?

When I tried to do exact same steps I noticed strange result in my Nasdaq100 sorted by "Visual Slope" of the regression channel. My hope was to see the slope changing form descending to ascending as I go through the sorted list, but instead it looks like they randomly mixed (even though I see sorted column with negative numbers 1st and then gradually positive).

Please see screenshot:

thank you,
Dmitry

ps: sorry for huge screenshot, it's my 1st message, hope I'll find out how to properly post big images later. any suggestions?
Bruce_L
Posted : Friday, November 27, 2009 9:27:07 AM


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Joined: 10/7/2004
Posts: 65,138
shevkoplyas,
Welcome to the forums. A very good foundation for learning how to use TeleChart can be gained by reviewing the following:

If you are new to TeleChart READ THIS FIRST!

I'm pretty sure the issue is that you are scrolled back to 04/10/08 instead of looking it current data.

-Bruce
Personal Criteria Formulas
TC2000 Support Articles
shevkoplyas
Posted : Friday, November 27, 2009 11:17:14 PM

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Joined: 11/26/2009
Posts: 16

QUOTE (Bruce_L)
I'm pretty sure the issue is that you are scrolled back to 04/10/08 instead of looking it current data.

Thank you, Bruce! It was exactly the case. I'll go through "If you are new to..." collection right away!

Dmitry

Bruce_L
Posted : Monday, November 30, 2009 8:20:39 AM


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Posts: 65,138
shevkoplyas,
You're welcome. Our pleasure.

-Bruce
Personal Criteria Formulas
TC2000 Support Articles
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