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Author: tm2001 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 80  
Subject: More on bases and TC2000 Date: 2/27/2001 10:37 AM
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Here's a little more on how I've used TC2000 to find some of the bases I look for. I hope it is helpful and am interested in seeing how others have approached this issue. I stated in another post that I had given up trying to develop a formula for a CWH base. Well, that's not 100% accurate. As I was scanning charts this morning, it occurred to me that I do have a couple of formulas which I use to find potential handles. The approach I like to take when building formulas of this type is to first decide what my end objective is. If I'm looking for high-EPS stocks within 25% of a yearly high and in the process of completing a CWH, then a scan like this can help:

(MAXH10-MINL10)/MAXH10 <= .06 AND
AVGV10 < AVGV50.10 AND
C > MAXH250*.75 AND
C > 15 AND
AVGV50 > 1000

This will find a flat consolidation area of no more than 6% over the past 10 days, with declining volume as compared to the prior 50 days, for stocks with a closing price above at least 75% of the yearly high price, with a price greater than $15, and with ADV at greater than 100K shares/day. (The 6% and 10 days are arbitrary....I use these particular parameters to find handles no more than 6% deep and at least 2 weeks long). The volume is also a personal issue, as are the minimum price and ADV. I like to find handles with volume lower than the upside of the cup. If we base this pcf on an easyscan which finds only those stocks with high EPS (for example, 50% last Q, 25% last Y, etc.) then the resulting stocks will be only those which meet our criteria. Are they all CWH patterns? Of course not. However, if we then visually scan backward on each stock to see what type of price/volume pattern was present before the current consolidation, we may indeed find a well-formed cup. Or we may find a flat base in some process of being formed. Or we may find a stock that's just resting.

This type of scan is also useful for finding shorting opportunities which have fallen and are currently consolidating. For this purpose, you could omit the formula for "price within 25% of yearly high" and end up with the following pcf:

(MAXH10-MINL10)/MAXH10 <= .06 AND
AVGV10 < AVGV50.10 AND
C > 15 AND
AVGV50 > 1000

Again, the values are arbitrary. Try it on your own and see if you find something that fits your trading method better. If we base this pcf on a group that looks like it's breaking down (or has already broken down), or even on all stocks if you want to look at a bunch of charts, we find ourselves looking at charts with 2-week consolidation areas of 6% or less. Somewhere in there we may find a stock that's resting on its way down to the next support level.

Anyway, just some ideas to fill in the blanks in the prior "bases" post. As always, we all need to build our own strategy first and then build the scans and formulas which help us implement it.
-tradermike
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