From the desk of Steve Strazza @Sstrazza
Yesterday, we wrote a post about scanning for new lows, putting our own spin on a strategy called “Wall Street’s only free lunch.”
I was joking with JC that it felt a bit uncomfortable to search through such a weak list of stocks. After all, we’re used to scanning for strength.
But the scan was a fun exercise, and we found some weakness we want to be buying in secular leaders.
The universe wasn’t exactly full of strong stocks, as we were scanning for new 52-week lows. But that’s OK; we have plenty others for that.
In this post, we’re going to walk through another scan we did internally this week. Unlike the “free lunch,” this one is more in line with our top-down approach of finding the strongest stocks in the strongest groups.
While we’re still scanning for new lows, we’re doing so on a much shorter time frame, and we’re adding additional filters to ensure all the stocks on our list are leaders.
We like to tailor our scan parameters to the market environment. As such, we’re always changing it up to adapt to the prevailing conditions.
Let’s dive in and walk through our thought process for this scan. Then we’ll take a look at some names and outline the best setups that we could find.
The idea of this scan was to find strong stocks that pulled back during December but remained above their first-half highs. We’re looking for stocks that showed relative strength and resilience during the recent volatility and recovered quickly from it.