Tips series: Screening for reversals

Posted by Profitspi Admin at 3/27/2017 12:00 AM

A common request is to screen or test for some kind of reversal in direction for an indicator.

This MACD Reversal screen from the screen library includes some sample criteria which you can change and extend as needed:

The relevant reversal criteria is shown below:

MACD Line (12 26 9) increasing for 2 bars

and MACD (12 26 9) [-2] decreasing for 20 bars

In this screen we are looking for stocks where the MACD had been decreasing for 20 bars but then increased for 2 bars.

The [-2] Offset setting is what allows us to backdate the first criteria to 2 bars prior to the current bar.

 

Variations

The 'MACD (12 26 9) [-2] decreasing for 20 bars' criteria requires downward movement on all 20 bars. If a stock has one flat bar or even a small upward movement it will fail the criteria.

To be less stringent you could apply a moving average to the MACD line:

SMA(MACD (12 26 9) 3) [-2] decreasing for 20 bars

Or you could break the criteria into chunks:

MACD (12 26 9) [-2] less than MACD (12 26 9) [-7] and MACD (12 26 9) [-7] less than MACD (12 26 9) [-12] and MACD (12 26 9) [-12] less than MACD (12 26 9) [-17]

Please get in touch if you need any assistance.