Hi Bruce:

I' ve been using formulas from your past posts to create historical volatility indicators for different periods.  What I've noticed, and confuses me, is the volatility measurement for the following 2 charts (obviously desirable) can be higher than for

a chart like this:

or even this:

So my question is whether there is a different/better indicator for me to identify stocks with that nice, smooth slope up like the first two, with desirable volatility, vs. charts 2 & 3 which have a volatility pattern I would like to avoid?

Also is there a way to measure the slope or volatility of an RS vs. S&P PCF curve to identify a RS curve that looks like this:

vs. this:

Thanks, Fred

What you might want to try doing is adding a Bollinger BandWidth indicator to the chart with the same settings as your Bollinger Bands. Then add Donchian Channels to the Bollinger BandWidth indicator.

If you want to check for the Bollinger Bands not getting wide, check for the top Donchian Channel applied to the Bollinger BandWidth indicator being below some arbitrary value (you would have to decide on the value).

You could combine this with the Historical Volatility indicator in an EasyScan if you want to use both conditions.

You could click on the Relative Strength 1-Yr (vs SP-500) indicator and select Create Scan Condition to create a condition for Moving Up.

Create Conditions from Your Chart (5:25)
Building a Scan with Multiple Conditions (7:29)

Bruce:
I tried your suggestion & it produced this on UA chart:

that looks like this:

I'm not sure what I'm looking at or how to interpret the new indicators.

This is what I'm actually trying to measure: "A measurement of a stock's volatility during the preceding twenty days of activity. The reading reflects the average trading range of the stock as compared to the average closing price and is presented as a percentage".  Is there a more straightforward way to measure this as a value?

Thanks, Fred

Fred,

    You may want to consider using the average true range indicator to find stocks with a low ATR while still uptrending.

  ATR provides a very simple way to measure volatility.

You can scan for stocks with low ATR that are smoothly uptrending.

Notice how the Bollinger Bands get wider every time price abrutly changes direction? My suggestion was to check for the value of the upper Donchian Channel to be less than an arbitrary value to eliminate symbols with wide Bollinger Bands. I can't suggest one for you - you would need to experiment with both this vaue and the period of the Donchian Channels.

Your volatility indictor would seem to be the following.

100 * (AVGH20.1 - AVGL20.1) / AVGC20.1

The suggestion from donv98 is similar but would take into account gaps.

100 * ((AVGH20.1 - AVGL20.1) / 2 + (ABS(H1 - C2) + ABS(C2 - L1) + ABS(H2 - C3) + ABS(C3 - L2) + ABS(H3 - C4) + ABS(C4 - L3) + ABS(H4 - C5) + ABS(C5 - L4) + ABS(H5 - C6) + ABS(C6 - L5) + ABS(H6 - C7) + ABS(C7 - L6) + ABS(H7 - C8) + ABS(C8 - L7) + ABS(H8 - C9) + ABS(C9 - L8) + ABS(H9 - C10) + ABS(C10 - L9) + ABS(H10 - C11) + ABS(C11 - L10) + ABS(H11 - C12) + ABS(C12 - L11) + ABS(H12 - C13) + ABS(C13 - L12) + ABS(H13 - C14) + ABS(C14 - L13) + ABS(H14 - C15) + ABS(C15 - L14) + ABS(H15 - C16) + ABS(C16 - L15) + ABS(H16 - C17) + ABS(C17 - L16) + ABS(H17 - C18) + ABS(C18 - L17) + ABS(H18 - C19) + ABS(C19 - L18) + ABS(H19 - C20) + ABS(C20 - L19) + ABS(H20 - C21) + ABS(C21 - L20)) / 40) / AVGC20.1

20-Day Average True Range

You may want to look at the Kaufman Efficiency Ratio.

For a length that long maybe a period of 52 weeks?

You may not get the combo you want of volatility and smooth.

but at least you can see the best of the ones that meet your volatility requirements.

Thanks

Many thanks Diceman.  Do you know the for formula? 

Its a built in indicator in V12.

Thanks

The stocks with the chart profile I'm after, like SBUX, ORLY or NKE, have a matching RSI or KER profile-that is a very smooth upward slope.  I measured the average slopes & put next to each symbol below but I don't know how to measure the maximum deviation, which is also key.

Bruce: can you help me develop a formula to measure the slope and smoothness of the RSI that echos stocks like these?  Thanks, Fred

NKE-1.25

ORLY-1.23

BOFI-1.7

ELLI-1.82

Alternatively could we measure that the 10D MA, 30D MA, 90 D MA & YTD MA have all been positive?

You might want to check this topic for a formula similar to what you are suggesting to find "uptrending " stocks 

http://forums.worden.com/default.aspx?g=posts&t=62169

and this topic which used another trick within TC2000 to find "strong" stocks

http://forums.worden.com/default.aspx?g=posts&t=10997

The first scan returns 38 stocks from the Russell 3000 (currently, obviously changes over time) when I apply two other filters

1. Price (>$5) and Average Volume (AVGV20 > 100,000) and
2. Price % Change 125 Days > 50

Neither is perfect for channel stocks. For example, the first will not return SBUX. First, you would need to drop Price % Change 125 Days down to 30, but I think the recent price drop in SBUX caused by the Chinese currency flap (I think) to fail one of the conditions. FYI droping the Price % Change to 30 increases the number of stocks returned by the scan to 77.

I'm currently playing around with Kaufman Efficiency and other measures to arive at a "best" scan for channeling stocks. An immediate conclusion is that one will always need to visually review a scan result to determine those

1. which fit "your" critertia, while mine might be different and 
2. eliminate outliers like THOR which seems to show in my results regardless of what I do:-(

If you are interested, you could try the following scan

1. Price (>$5) and Average Volume (AVGV20 > 100,000)
2. Price % Change 125 Days > 50
3. Kaufman Efficiency(125) > 20
4. Price Volatility > 20
5. Price Volatility < 75

Still needs a visual check on the results Obviously you can play with the parameters for your own goals, but I'd be interested in your feedback.

Cheers

Knew I would forget something.

I put a Donchian Channel (62) on a plot of KEff(62) and then add a Scan condition for Chan Bottom  - Greater Than Zero on the last scan I suggested.

Many thanks brochane.  I'm trying to get up to speed on scans-could you include screen print of the criteria in the scan, as I'm not getting any results and must be doing something wrong.  Thanks, Fred

brochane, I got all criteria working from your first post and you've done a great job.  Finds majority of channeling stocks in my watch list, but includes one I don't feel should be there: STMP.  Didn't include other good ones like NKE or SBUX, even when I dropped Price % Change 125 Days > 50 to 30.

Could you explain in greater detail how to create "put a Donchian Channel (62) on a plot of KEff(62) and then add a Scan condition for Chan Bottom  - Greater Than Zero" please?

Thanks, Fred

Seems I can't Paste, but I can Type

"List to Scan: Russell 3000 Component Stocks

Efficiency Ratio 125 > 20 - Daily

Price History > 5 Daily

Avg Vol 20 > 100000 - Daily

Price Percent Change 125 Days > 50 - Daily

Donchian Channels 62- Chan Bottom Efficiency Ration 62> 0 - Daily

Price Volatility Between 20.00 and 78.00"

I would say not to worry about the Donchian Channel condition to start with, it's a minor refinement.

Plot the Efficiency Ratio on your chart, click on the little arrow beside the Efficiency Ratio text, Select Create Scan Condition, select Greater Than 20, and apply to your watchlist.

All the other conditions can be created from the Add Condition option when you open Edit Tab on the Scan.

Thank you.  What's holding out those 2 stocks is actually Price Volatility, not Price % Change...trying to figure out how to plot that value so I can see how to get those included.

Which Two?

I stand corrected: by reducing Price Volatility to >10, AND lowering Price % Change 125 Days >20, it included it included NKE & SBUX, but obviously included some undesirables.  Now that I have the hang of it, I'll continue to play....Thanks, Fred

Minor Update; From work in progress

One thing I want to eliminate from the results of my scan are stocks like QLTY, where they have met my gain criteria with a single move upward. My solution is to

1. plot a CCI(20) indicator
2. Apply a Donchian Channel (100) to the CCI indicator) and then
3. Create a Scan Condition that the Upper Channel is less than 500

So far, trying Upper Channel less than 400 eliminates some stocks with recent strong moves, in particular those that have gapped up out of the channel. I'm not sure how I want the scan to handle those stocks.

If you try it, let me know how you view the results.

I think this scan is as good as I can do for a six month period

• List To Scan: Russell 3000
• Price Percent Change 125 Days > 50 - Daily
• Donchian Channels 100 0 Chan Bottom Stochastics 70 %K3> 50 - Daily
• My Universe (Price & Volume)

The trick is set up a Stochastics Plot with period 70 for the first variable, and then apply a Fonchian Channel with period of 62, and then create a Scan Condition for the bottom of the Donchian Channel to be above 50.

Let me know if you try it.

Dude, I thought I was OCD on this stuff! (just kidding).  I just got the CCI/Donchian done  per your 2nd to last post & was going to include that in my scan.  I assume that is in addition to Donchian Channels 100 0 Chan Bottom Stochastics 70 %K3> 50 - Daily?

I meant to tell you, and this is just me, I optimized Price Volatility to >12 and <40.  This picked up stocks like SBUX and removed some more volatile ones.  But I now notice you're no longer includes Price Volatility.  Which condition more or less replaced it?

You read my mind in terms of whether to refine out the stocks with recent strong moves that have gapped up.  If they've had smooth slopes like we both like, I was thinking why rule them out, but I guess they really violate the ideal chart we're looking for, right??  The other side of me says many of them never broke the 50 SMA & if the gap up represents a new direction in the slope, and the stock hugs the top Bollinger band on a great run, why discount it....

To "give back" I don't know if you saw my other post about optimizing buy signals, but I'd be interested in your thoughts: http://forums.worden.com/default.aspx?g=posts&t=63887.  The last formula Bruce created seems very reliable, but I'm fairly new to this.  I was reminded today that Mr. Bollinger recommended people didn't buy based on brushing the bottom band and vice versa on the top band, but it's a pretty damn good signal as far as I can see.  Now trying to work on the sell signal so to not sell on a "false" sell signal if there if the stock is still running.

Regards, Fred

P.S. I really have to thank you.  Even using just some of your criteria I was able to add an additional 78 stocks with really nice charts to my Watch List.  I'll use the additional criteria to refine them, but I feel like I hit the motherload!  Thanks again for sharing, Fred

1. Thanks for your thanks, it confirms I'm on the right track
2. I understand your relaxing some of my criteria, and I may do some of it myself. When I started this exercise last week, I drafted an introduction in which I said that channel definition is an nexact science, so modifying the parameters was what I expected.
3. Sorry, I wasn't clear in my Monday, August 17, 2015 6:37:34 PM post. This is a completely different scan from the first one I posted, not added scan conditions. The two return very similar lists, I feel the second returns a few more, and eliminates some false positives, still not "perfect".
4. Trading Gaps: I'm not sure how to proceed. I was surprised when I saw so many (subjective) popping up. Previous readings on trading gaps range from a complete book on gaps, which says you can't make money trading them, to Kacher & Morales, who treat it a very tradeable signal (you can start here http://www.virtueofselfishinvesting.com/faqs/answer/How-do-you-determine-if-a-stock-gapping-up-is-buyable-If-it-is-buyable-how-do-you-time-your-entry). But then again http://thepatternsite.com/KacherMorales.html. Go Figure. My best guess is that a Buy trade would winning if Price pulls back to the bottom of the gap bar, and then starts up again, or if Price moves above the top of the Gap bar eg. TREE. But I can find charts to support any strategy. EXEL is still consolidating four weeks after BGU (buyable Gap Up for brevity). ANAC ran up 1% after BGU, and is now pulling back/consolidating? And so on. Sounds like another minor project after Sept 15 :-)

Sorry typo in last; ANAC ran up 17%, not 1%

Stocks which had been in Channel, but then gap up:

I have 17 recent gap ups in a watch list. The "best" may pull back to the half way point of the gap up bar, and then proceed further up. ANAC, TREE, SKX, USCR, NTRI?, FIX, AHS, TAST, DXCM, STMP,  AMSG. Eleven of 17, not bad

The others, W, NFLX, HQV, SFG, INCR, ALJ break down in some fashion or another.

So I would a stock which gaps up out of the channel until either

1. Price closes below the bottom of the gap up bar or
2. Stoch 12,3 moves below the 80 line, at which point bad things seem to happen

No thoughts yet on entry on a gap up, but I'm unlikely to do that at the moment

There is an article in Sept issue of TASC magazine on trading gaps