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The market staged a little bit of a sell-off over the last couple of hours, reminding us once again that any rally can quickly disappear.
That led me to wonder what stocks have been doing well lately, but the problem with most scans is that you can search for stocks that are over a certain percentage at a certain time. I can easily search for a stock that is above 0% over the last 1, 3, and 6 months, for example, but then what do I do? How do I decide one is better than another? Spend hours poring over charts? Is it better to look at stocks that performed over time or most recently? Argh!
That’s where adding a rank function to your scan can be incredibly helpful.
Do you want to see the top 3 performing stocks that have the potential to keep going higher?
Make sure you keep reading to see how you can create a custom scan and rank your stocks to see which companies you should be adding to your watchlist and which ones you should be staying away from.
Here’s a simple idea that you can use to help identify which stocks have been performing the best over time and may have what it takes to keep going higher.
I’m using Finviz.com with a premium subscription, but you can get this information from a variety of places if you’re willing to do a little more work to set this up.
I want to set up a filter for the S&P 500 companies and I want to pull each company’s 1-week, 1-month, and 3-month stock price performance.
Here’s a snapshot of what that looks like on Finviz.com:
I’m going to export and take that into Excel, but feel free to use any data platform you’re comfortable with.
Once in Excel, I create a new column and add up each of the performance columns and divide by 3 and I get a very simple, very easy average performance over different time frames. Then I sort the stocks by highest average performers to the top of the list. The ones that are at the top of the list, tend to stay there for some time. This can give you ideas for stocks to look at cash-secured puts or whatever your preferred option strategy may be.
This can also be used to scan through industries and see industry rotation as it’s happening. Four of the five worst performers are in the Travel industry. Ouch!
For you advanced traders out there, you can play with this even more. Instead of 1-week, 1-month, and 3-months, you can alter the time frames and see which ones give you the best results for your trading style.
You can also make your own weighted average. Maybe you want to give the 1-week performance more weight in the average calculation, you can do that by doing something as simple as (2*one week perf)+(one-month perf)+(three-month perf) and take all of that and divide by 4. What that does is add the 1-week performance twice in your calculation, giving it more weight than the other columns.
You can also keep track of this info and see if stocks stay at the top and bottom. How quickly do they rotate on the list using your calculations?
If you run this over the weekend, you’ll see the top 5 or 10 stocks, and the bottom 5 or 10 stocks tend to stay on the list for a number of weeks. That doesn’t mean it’s ready to buy or sell on Monday, so you can use your own timing strategies, but a simple scan and a simple performance average can actually give you great trade ideas each week.
You do need to be careful too, because some stocks like Energy have been on a tear for over 3 months or more, but have shown weakness over the last week or two. They may still sit atop of the leaderboard, even though in the short-term they are not good, bullish plays.
You can also set up a neutral portfolio by using bullish plays on the top performers and bearish trades on the worst performers. Make sure you test your theories before you implement a trading strategy!
If you have any questions, comments, or anything we can help with, reach us at any time.
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Guest Writer, Filthy Rich, Dirt Poor
Editor, Wealthy Investor Society
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