Are you screening stocks like Mark Minervini?
On October 20, 2020, Mark Minervini made the following tweet with some of his trades that he recently entered into.
So, the first thing that came to my mind was to check if my screening criteria is good enough to get similar stocks on my Watchlist. The watchlist is the first step, to put money or not, is next.
In this post, I will focus on the screening (Watchlist) part only, and will not get into the reasons that might have led Mark to put his money in them. The charts with timings of all the trades can be seen at the end of the post.
Mark's Filtering Conditions
Mark never goes against the long-term trend. He looks to go long only in a stage 2 uptrend.
The first part of his investing process is to filter stocks on the basis of the underlying trend. The next part is to buy them as they emerge from their consolidation periods.
In his book 'Think & Trade Like a Champion', he gave his famous Trend Template Criteria, that he uses for screening. According to that, a stock must meet the following 8 criteria to be deemed in a confirmed Stage 2 uptrend:
The current stock price is above both the 150-day (30-week) and the 200-day (40-week) moving average price lines.
The 150-day moving average is above the 200-day moving average.
The 200-day moving average line is trending up for at least 1 month (preferably 4–5 months minimum in most cases).
The 50-day (10-week) moving average is above both the 150-day and 200-day moving averages.
The current stock price is trading above the 50-day moving average.
The current stock price is at least 25% above its 52-week low (30% as per his book 'Trade Like a Stock Market Wizard').
The current stock price is within at least 25% of its 52-week high (the closer to a new high the better).
The Relative Strength ranking (RS ranking), as reported in Investor’s Business Daily, is no less than 70.
Except, the last condition #8 (RS ranking above 70), all others can be put on any screening website (like Chartink in India), to get the list of stocks fulfilling the Criteria. The link to see the list of stocks listed in India, fulfilling these criteria currently, is at the end of the post.
But it is also true that you'll be checking charts not necessarily from the above list. Since I use TradingView to see charts, a few lines of code can tell me whether the stock I am looking at is meeting the above-mentioned Criteria or not. And if not, then which condition is not being met (in case I wanna relax any!). Using Bar Replay mode, I can also go back on any date historically to check if the said criteria were met on that particular date or not. Going back to study historical charts is a pretty useful way to improve one's trading technique.
If you use TradingView and want to display similar info on your charts, just fill the form at the end of this post, and I will give you its access for FREE.
My Watchlist (Pro-Setups Watchlist)
Now, I am a big follower of Australian trader Daryl Guppy too. His way of using multiple moving averages (GMMA) can objectify the way one looks at the trend. The subscribers to the Pro-Setups script know this very well (by the way, you can use the Pro-Setups script also for FREE).
In the Pro-Setups' Watchlist, stocks come either on pullbacks or when they are moving in a tight range.
There is already a filter made specifically for screening stocks passing the Trend Template Criteria. This makes life easier for those who religiously follow Mark's way of trading. For me, it's like a combination of GMMA + Mark's Criteria.
Those who are not aware, please note that:
Stock comes in the Pro-Setups Watchlist when a blue dot appears at the bottom of the chart.
The script shows trends on Daily timeframe and Weekly (higher) timeframe, in the form of colored bars at the top of the chart. Green color represents Uptrend, Red represents Downtrend & Yellow represents signs of a probable change in trend.
Did Mark's trades come on my Watchlist? If yes, then when?
First of all, my Watchlist is for stocks listed in India only, but the screening rules can be the same for stocks worldwide. Below is the summary table showing the dates of trades taken by Mark and the dates on which they would have appeared in my Watchlist, using the same set of rules I use for Indian stocks. You can also see the chart of each stock below the table with Mark's trades timing and Watchlist dates mentioned in them.
Of the 18 stocks, 16 stocks appeared in the Watchlist not too far away from the day Mark bought them, giving enough time for preparation.
Only AMD and CRWD were the ones that didn't come on the Watchlist near to the time when Mark bought them. Interestingly, AMD appeared in July, and its chart looks pretty good to buy at that time (though in hindsight only).
BILL, although came on the Watchlist a few days before Mark bought it, its trend bar is Yellow because of its limited trade history of less than a year.
The Weekly timeframe trend bar, as well as Daily timeframe trend bars, were both Green when Mark bought them. This condition is also true at the time of their appearance on my Watchlist.
As of 25th October 2020, there are 389 companies in India, meeting the Trend Template Criteria, though my Watchlist has only 7 companies if I filter them with 'Green' trend bars condition.
The following are the charts on TradingView which shows these stocks on Pro-Setups script. I have removed the moving average clouds, in order to show only the underlying trend and blue dots at the bottom. Click to enlarge.
I believe that I am able to filter out stocks and remove unnecessary noise by combining Guppy's GMMA methodology along with Mark's Trend Template Criteria. That gets the first job done of creating a Watchlist. Next comes the REAL job of choosing where to put money in. That, however, is a subjective part, and one rule doesn't fit all. So I am ending the discussion here.
Feel free to use the resources mentioned below and leave comments, feedback, or suggestions, if you have any. Thank you!
Links for the resources mentioned above
To see the list of Indian stocks meeting Mark Minervini's Trend Template Criteria currently (bookmark it) - click here.
For more information on the Pro-Setups script, click here.
For access to Mark Minervini's Trend Template Criteria script on TradingView, fill this Form: